Suppose the average price of gas in 2012 was $0.95 per litre and $0.97 in 2013.The inflation rate was 3 percent in 2013.What was the 2013 price of gas in 2012 dollars?

Question

Suppose the average price of gas in 2012 was $0.95 per litre and $0.97 in 2013.The inflation rate was 3 percent in 2013.What was the 2013 price of gas in 2012 dollars?

Quizplus · Accepted Answer

First, we need to find the inflation-adjusted price of gas in 2013. We can do this by multiplying the 2012 price by (1 + inflation rate):
0.95 x 1.03 = 0.9765 (rounded to 4 decimal places)
Next, we need to convert the 2013 price (in nominal dollars) to 2012 dollars. We can do this by dividing the 2013 price by the inflation factor:
0.97 / 1.03 = 0.9427 (rounded to 4 decimal places)
Therefore, the 2013 price of gas in 2012 dollars was $0.942.

Suppose the Average Price of Gas in 2012 Was $0