When the loose monetary policy IS implemented, the LM curve moves to the lower right, while the IS curve remains unchanged, resulting in a drop in interest rates, which will increase social investment, lead to an increase in total social demand, and thus promote inflation.

Generally speaking, the simultaneous use of a proactive fiscal policy and a loose monetary policy, although crowding out, will generally stimulate the total social demand, and the market liquidity will be abundant or even flooded, pushing up inflation.

In the AD-AS model, the increase of total social demand will raise the price level (move the AD curve to the upper right), which also pushes up inflation.

Stagflation is characterized by high unemployment, high inflation and low economic growth.

When inflation occurs, we should implement a prudent or tight monetary policy to shrink liquidity. Whether tightening fiscal policy, increasing taxes or reducing government spending will help curb inflation.

Stagflation is an economic problem that is difficult to solve, and the three cannot be taken into account. Only fiscal policy and monetary policy can solve at most two of them.

To solve the stagflation problem, we can refer to their economic theories, such as supply school and rational expectation school.