The level of prices and the value of money

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Reference no: EM13770265

Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut, and one newspaper. In year one, the basket costs $8.00.

In year two, the price of the same basket is $7.00. From year one to year two, there is (Deflation, Inflation) at an annual rate of _____%?

In year one, $40.00 will buy ________ baskets, and in year two, $40.00 will buy ________ baskets.

This example illustrates that, as the price level falls, the value of money (rises, falls, remains the same)

Reference no: EM13770265

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