Respuesta :
Answer:
The correct answer is: deflation; 0.1%; 5; 5.55; rises
Explanation:
In year one the basket costs $10.
In year two the basket costs $9.
Change in the price level
= 9-10/10
= -1/10
= -0.1
This means that there is deflation in the price level by the rate of 0.1%.
In year one $50 will buy $50/$10 = 5 baskets.
While, in year two $50 will buy $50/$9= 5.55 baskets.
This shows that as the price level falls, the value of money increases.
From year one to year two, there is deflation.
In year one, $50.00 will buy 10 baskets.
In year two, $50.00 will buy 5.6 baskets.
This example illustrates that, as the price level falls, the value of money rises.
What is deflation?
Deflation is when the general price levels of goods and services decline. When there is deflation, the prices of goods and services decline and the value of money increases. Thus, the purchasing power of money increases.
To learn more about deflation, please check: https://brainly.com/question/14297750
