Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the real price of 1987 gasoline in 2012 dollars, we should:

Question

Quizplus · Accepted Answer

To convert the nominal price of gasoline in 1987 to the real price of 1987 gasoline in 2012 dollars, we need to adjust for inflation. Inflation is measured by the CPI (consumer price index), which shows the change in the cost of goods and services over time. We need to multiply the nominal price of gasoline in 1987 by the 2012 CPI and divide by the 1987 CPI. This will give us the real price of gasoline in 1987 dollars adjusted for inflation up to 2012. Therefore, the correct answer is B.

Suppose the Nominal Price of Gasoline Was $0