P15 滞胀（可汗学院 《宏观经济学》）

we have learned that a moderate level of inflation is associated with a good economy

but what we saw particularly in the early 70s in 1973 when the oil embargo hit is that we started to experiencs sth that was labeled stagflation

it is a bizarre circumstance where you have inflation as the same time as stagnation in the the economy

that is where they get this combination of words of stagflation

let us think how that would happen

particularly let us think how that would happen due to a supply shock

there is other ways you get stagnation

if you have strange regulation over regulation if the govenment does werid things

but the classic example is a supply shock

when we say supply shock it is like an oil embargo all of a sudden

the supply of oil or sth just gose down dramatically

it could be because of some type of emergency

just to think about how that would affect the rest of this chain

the supply of sth dramatically goes down

we know the supply has inverse relationship with price

when supply goes down then price immediately goes up

you might say oil is only part of my pocket book when i drive around

but it is not becuase even when you buy a fruit you really paying for the transportation cost

so the price of oil affects fruit food any goods and services

it is one of thoes things that is pervasive throught the economy

so prices of a bunch of things could generally go up

once again reverse relationship here demand is going to plummet

if demand plummets utilization plummets investmen plummets

it is not the price that they can sell things at

now price is foundermentally a big cost

if all of these things go down that is just going to kill employment

kill wages and further make demand even worse

in the case of oil, it affects other part of the economy