What Is a Goldilocks Economy?

To borrow a term from the classic children’s fable Goldilocks and the Three Bears, a Goldilocks economy is neither too hot nor too cold, but just perfect. The word refers to the ideal condition of a financial system. Full employment, economic stability, and consistent growth are all present in this ideal condition. The economy is neither growing nor shrinking rapidly. A Goldilocks economy is therefore warm enough with steady economic growth to avoid a recession, but not hot enough to propel it into the inflationary territory.