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Misery Index

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The misery index is the unemployment rate plus the inflation rate. Reflecting its unhappy name, however, the misery index is usually only spoken of when both rates are high. Thus if the inflation rate is 7% and the unemployment rate is 8%, the misery index is 15%. The term "misery index" was coined by economist Robert Barro. The misery index is associated with the economic phenomenon known as stagflation, which combines recession with inflation. In the U.S., the misery index gained notoriety during the 1970s, when the country faced both inflation (partly because of rising oil prices) and recession. Because inflation had traditionally been associated with boom times and a high unemployment rate with recession, the twin phenomena of the misery index appeared contradictory. The inadequacy of Keynesian theory to explain stagflation and the high misery index spurred economists to look to monetary policy and supply-side economics for solutions. The misery index was mentioned less in the 1990s and early 21st century, periods of low inflation and (to a lesser extent) low unemployment.

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