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 $10.00.1. in year two, the price of the same basket is $9.00. is this called inflation or deflation? what is the annual rate of it? 2. how many baskets can $80.00 buy in year one? how many in year two? 3. what happens to the value of money if the price level falls?

1. Deflation

-10%

2. In year 1 - 8 baskets

In year 2 - 8.9 baskets

3. The value of money increases

Explanation:

Deflation is a fall in general price levels. The price fell from $10 to $9. It indicates deflation has occured.

Inflation is a rise in price level.

Annual rate = (current year price - previous year price ) / previous year price

(9 - 10) / 10 = -0.1 = -10%

The annual change is negative because price level fell.

$80 would buy $80/$10 = 8 baskets of goods in year 1

$80 Will buy $80/$9 = 8.9 baskets of goods in year 2.

A fall in price levels increases the value of money because less money can buy the same basket of goods. Therefore, the purchasing power of money increases.

answer: b. false

the staff is a set of five horizontal lines and four spaces which represent a different musical pitch. the lines and the spaces are numbered from bottom to top, the bottom line is the first line and the fifth line is the line on the top. the notes on the top of the staff (fifth line) have a higher pitch than a note at the bottom of the staff.