With supply constraints the problem you tend to get is "stagflation" -- rising inflation and rising unemployment simultaneously.

One answer to this, as Blanchard points out, is that if one set of costs (say resource costs) are rising, other costs have to be stabilized if employment levels are to be preserved.

This can mean "incomes policy," where business, labor, and government get together to make sure that wage deals do not exacerbate inflation. Countries such as Germany that had this kind of system in place got through the 1970s better than countries that didn't, like Britain for example.