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.