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This article analyzes the causes of the 1979 slowdown in economic activity with the use of a simple supply and demand framework. The analysis is kept simple to demonstrate that models of the economic system need not be large and complex in order to give a general picture of the forces that produce changes in output and the price level. The near-term economic outlook is then discussed within this framework. No specific forecasts are made, but, given certain assumptions about economic behavior, the implications of different policy scenarios are summarized.

Explaining the Economic Slowdown of 1979: A Supply and Demand Approach