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 energy drink, one egg sandwich, and one bike rental. In year one, the basket costs $11.00.

In year two, the price of the same basket is $12.00. From year one to year two, there is at an annual rate of .

In year one, $110.00 will buy baskets, and in year two, $110.00 will buy baskets.

This example illustrates that, as the price level rises, the value of money .