If the price of gasoline increased from $2.50 per gallon in 2006 to $3.50 per gallon in 2010,during which time the CPI increased from 203.1 to 220.2,then we can conclude that the real price of gasoline declined from 2006 to 2010.

Question

Quizplus · Accepted Answer

To determine the real price of gasoline, we need to adjust for inflation using the CPI. The formula for calculating the real price is (nominal price/CPI) x 100. Applying this formula, the real price of gasoline in 2006 was (2.50/203.1) x 100 = $1.23, and in 2010, it was (3.50/220.2) x 100 = $1.59. Therefore, the real price of gasoline increased from 2006 to 2010, despite the nominal increase in price.

If the Price of Gasoline Increased from $2