2 The connection between money and prices -Inflation rate the percentage increase in the average level of prices. price amount of money required to buy a good. ■ Because prices are defined in terms of money,we need to consider the nature of money,the supply of money,and how it is controlled. CHAPTER 7 Money and Inflation slide 11 CHAPTER 7 Money and Inflation slide 11 The connection between money and prices ▪ Inflation rate = the percentage increase in the average level of prices. ▪ price = amount of money required to buy a good. ▪ Because prices are defined in terms of money, we need to consider the nature of money, the supply of money, and how it is controlled. 2