Suppose the average price of gas in 2018 was $1.25 per litre and $1.30 in 2019. The inflation rate was 3 percent in 2019. What was the 2019 price of gas in 2018 dollars?

Question

Quizplus · Accepted Answer

To find the 2019 price of gas in 2018 dollars, we need to adjust the 2019 price for inflation. We can do this using the following formula:

Adjusted price (in 2018 dollars) = Nominal price (in 2019 dollars) / (1 + inflation rate)

Substituting the given values, we get:

Adjusted price (in 2018 dollars) = $1.30 / (1 + 0.03) = $1.262

Therefore, the answer is A) $1.262.

Suppose the Average Price of Gas in 2018 Was $1