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 2008 dollars,we should:

Question

Quizplus · Accepted Answer

To convert the nominal price of gasoline in 1987 dollars to the real price in 2008 dollars, we need to adjust for inflation. We do this by using the ratio of the CPI in 2008 to the CPI in 1987. Therefore, we should multiply the nominal price of gasoline in 1987 dollars by the 2008 CPI and divide by the 1987 CPI. This will give us the real price of gasoline in 2008 dollars.

Suppose the Nominal Price of Gasoline Was $0