Wage and Price Dynamics in a Recessionary Economy

In an economy experiencing a recession, the consensus among workers and firms is that inflation will be 4% over the next year. However, due to high unemployment, the labor market conditions result in a negative bargaining gap of -1.5%. Given this situation, which of the following outcomes for nominal wage and price adjustments is the most likely?

An economy is in a recession with high unemployment, leading to a negative bargaining gap. Arrange the following events in the correct chronological order to show how this situation leads to downward pressure on price inflation.

Calculating Wage and Price Adjustments in a Recession

Deflation as a Consequence of a Negative Bargaining Gap

Downward Wage-Price Spiral from a Negative Demand Shock