If you have ever sold a home, you know that what happens after a certain amount of time on the market, a home price will drop because the seller would like to sell the home.Can you see the series of events that compounded the problem in this illustration?While there were many other issues, this is a great example of how a situation can turn very difficult quite quickly.Another item that you may not remember is that oil prices increased quite a bit early in 2008.This led to some cost-push inflation.This inflation created an opportunity where the short-run AS curve shifted to the left and also left the Fed needing to keep interest rates higher.Here is a graph as to what this looked like.Could this have influenced the Great Recession as well?

PL SRAS 2 SRAS 1 P2 P1 AD Real GDP (Y) Y2 Y1 www.economicshelp.org