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 latte, one scone, and one bus trip. In year one, the basket costs
$15.00
. In year two, the price of the same basket is
$14.00
. From year one to year two, there is at an annual rate of In year one,
5120.00
will buy baskets, and in year two,
$120.00
will buy Haskets. This exampie illustrates that, as the price level fails, the value of money