1. The level of prices and the value of money Suppose the price level reects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of chips, and one comic book. 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 V at an annual rate of In year one, $40.00 will buy V baskets, and in year two, $40.00 will buy V baskets. This example illustrates that, as the price level falls, the value of money V . e same basket is $7.00. From year one to year two, there is at an annual rate of baskets, and in year two, $40.00 will buy inflation bask deflation at, as the price level falls, the value of money12.50% -1.43% 1.00% needed to buy a basket of goods containing one can of soda, one bag 1.25% d one comic 14.29% om year one to year two, there is at an annual rate of ar two, $40.00 will buy baskets. the value of money0. 18 1. The level of prices and he of money 0.2 Suppose the price level refled umber of dollars needed to buy a basket of goods containing one can of soda, one bag of c 2.86 book. In year one, the baske $8.00. 5 In year two, the price of the sket is $7.00. From year one to year two, there is at an annual rate of 5.71 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 money0.18 he value of money 0.2 is the number of dollars needed to buy a baske ds containing one can of soda, one bag of 2.86 costs $8.00. 5 same basket is $7.00. From year one to year tw is at an annual rate of 5.71 baskets, and in year two, $40.00 will buy baskets. as the price level falls, the value of moneyts the number of dollars needed to buy a basket of goods containing one can of soda, one bag of c costs $8.00. same basket is $7.00. From year one to yea rises at an annual rate of falls baskets, and in year two, $40.00 will remains the same as the price level falls, the value of money