Mechanism for Reducing Inflation via High Unemployment

Using High Unemployment to Reduce Inflation After the 1970s Oil Shocks

Interpreting Inflationary Trends

An economy had an inflation rate of 4% last year. This year, due to a recession, the economy is experiencing a negative bargaining gap of -1.5%. Based on the principle that the current inflation rate is determined by last year's inflation plus the current bargaining gap, what is the expected inflation rate for the current year?

Over a three-year period, an economy's inflation rate has steadily increased. Based on the principle that the current inflation rate equals the previous period's inflation rate plus the bargaining gap, what can be inferred about the bargaining gap during these three years?

Maintaining Stable Inflation