9. The level of prices and the value of money

Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of tea, one biscuit, and one magazine. In year one, the basket costs $9.00.

In year two, the price of the same basket is $8.00. From year one to year two, there is__(inflation, deflation) at an annual rate of___(1.00%,1.11%,1.25%,11.11%,12.50%).

In year one, $72.00 will buy__(0.11, 0.13, 4.5, 8, 9)baskets, and in year two, $72.00 will buy__(0.11, 0.13, 4.5, 8, 9)baskets.

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