There is an inverse relationship between price level and the value of a dollar.
The price level and value of the dollar are inversely related in a way that if the price level increases, less can be purchased by the given dollar. Therefore, the value of the dollar will decrease. On the other hand, if the price level decreases, the dollar's value will increase because more can be bought from the given dollar.
Let's take an example and solve it as follow;
The value of the dollar changed through the change in the price level is found by V=1/the change in the price level.
Therefore, if the price level rises when the price level changes to 1.25,
V = 1/1.25
= 0.8
The value of the dollar will be 0.8.
Therefore, if the price level falls when the price level changes to 0.50,
V = 1/0.50
= 2
The value of the dollar will be 2.
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