DEFINITION of 'Stagnation'

A prolonged period of little or no growth in the economy. Economic growth of less than 2 to 3% annually is considered stagnation. Periods of stagnation are also marked by high unemployment and involuntary part-time employment. Stagnation can also occur on a smaller scale in specific industries or companies or with wages.

BREAKING DOWN 'Stagnation'

In late 2012, supporters said the Federal Reserve's third round of quantitative easing was necessary to help the United States avoid economic stagnation. The central bank's proposed asset purchases of mortgage-backed debt were expected to foster economic growth, bolster the housing market and improve employment prospects. The Fed also kept interest rates low as part of its plan to prevent stagnation.

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