(Solved): 1. The level of prices and the value of money Suppose the price level reflects the number of dolla ...

1. 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 can of seltzer, one bag of pretzels, and one shuttle ride. In year one, the basket costs \( \$ 11.00 \). In year two, the price of the same basket is \( \$ 10.00 \). From year one to year two, there is at an annual rate of In year one, \( \$ 55.00 \) will buy baskets, and in year two, \( \$ 55.00 \) will buy baskets. This example illustrates that, as the price level falls, the value of money