Suppose the average price of gas in 2009 was $0.95 per litre and $0.97 in 2010. The inflation rate was 3 percent in 2010. What was the 2010 price of gas in 2009 dollars?

Question

Quizplus · Accepted Answer

To find out the 2010 price of gas in 2009 dollars, we need to account for inflation.

First, we need to find out the inflation rate from 2009 to 2010:

Inflation rate = (final value - initial value) / initial value x 100%

Inflation rate = ($0.97 - $0.95) / $0.95 x 100% = 2.11%

Next, we need to adjust the 2010 price of gas for inflation:

2010 price in 2009 dollars = 2010 price / (1 + inflation rate)

2010 price in 2009 dollars = $0.97 / (1 + 0.0211) = $0.95

Therefore, the 2010 price of gas in 2009 dollars was $0.941, which is answer choice B.

Suppose the Average Price of Gas in 2009 Was $0