define stagflation refers to a state of an economy when inflation is high and the economy does not grow at the same rate and employment is declining. It's crucial to understand what stagflation means, because businesses can experience high inflation along with a drop in consumer demand. The stagflation definition in economics is why it becomes more difficult to be profitable during these periods. Many readers will delve into the meaning of stagflation to learn how previous economies have reacted to such an occurrence.