What happens to the number of dollars needed to buy a representative basket of goods when the price level falls?

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Kristelle BalandoLv10

27 Aug 2020

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Related questions

Choose the correct answer for the below -

When the price level rises, the number of dollars needed to buy a representative basket of goods :

a. increases, so the value of money rises.
b. increases, so the value of money falls.
c. decreases, so the value of money rises.
d. decreases, so the value of money falls.

amaranthserval787

Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut, and one newspaper. 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 (deflation/inflation (1)) at an annual rate of (???? (2)). In year one, $72.00 will buy (?????(3)) baskets, and in year two, $72.00 will buy (?????(4)) baskets. This example illustrates that, as the price level falls, the value of money (rises/falls/remains the same (5)).

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