What step connects the vicious deflationary cycle from lower left to upper right?

In the context of a vicious deflationary cycle, the connection from lower left to upper right typically involves the relationship between declining prices and economic activity. When prices decline, consumers anticipate that prices will continue to decrease, leading to reduced spending. This reduction in consumer demand causes businesses to experience lower revenues, which can result in cuts to production and layoffs, thereby amplifying the cycle of deflation.

The step of declining prices explicitly illustrates how deflation can spiral out of control; as goods and services become cheaper, the expectation of future price declines can lead consumers to postpone purchases, further aggravating the economic downturn. This illustrates the interconnectedness of price levels and overall economic health, forming a critical pathway in a deflationary scenario.

The other options, while related to the cycle, do not directly represent that pivotal step which connects the dynamics of price decline to a deflationary spiral. Workers demanding pay increases or expecting future price increases can occur later in the cycle, while employment decline is a consequence of the price declines rather than a stepping stone in connecting the visual representation from lower left to upper right.