Question

On April 1, the price of gas at Bob's Corner Station was $3.35 per gallon. On May 1, the price was $3.85 per gallon. On June 1, it was back down to

$3.35 per gallon.
Between April 1 and May 1, Bob's price incrdased by
Between May 1 and June 1, Bob's price decreased by
Suppose that at
gas station across the street, prices are always 20% higher than Bob's. In absolute dollar terms, the difference between Bob's prices
and the prices across the street is
when gas costs $3.85 than when gas costs $3.35.
Some economists blame high commodity prices (including the price of gas) on interest rates being too low.
Suppose the Fed raises the target for the federal funds rate from 2% to 2.25%. This change of
percentage points means that the Fed
raised its target by approximately

Answer 1

1. Between April 1 and May 1, Bob's price incrdased by $0.50 or 15%.

2. Between May 1 and June 1, Bob's price decreased by $0.50 or 13%.

3. Suppose that atgas station across the street, prices are always 20% higher than Bob's. In absolute dollar terms, the difference between Bob's prices and the prices across the street is $0.1 more expensive when gas costs $3.85 than when gas costs $3.35.

4. Suppose the Fed raises the target for the federal fundsb rate from 2% to 2.25%. This change of percentage points means that the Fed raised its target by approximately 0.25%.

Explanation:

1. Between April 1 and May 1, Bob's price incrdased by...

Take the difference of the prices to find an absolute value:

$3.85 - $3.35= $0.50.

Use the following formula to find the relative value:

C= |Original value - New value|/ Original value

`C=(|OV-NV|)/(OV)=(|3.35-3.85|)/(3.35) =0.15`=15%.

2. Between May 1 and June 1, Bob's price decreased by...

Take the difference of the prices to find an absolute value:

$3.85 - $3.35= $0.50.

Use the following formula to find the relative value:

C= |Original value - New value|/ Original value

`C=(|OV-NV|)/(OV)=(|3.35-3.85|)/(3.85) =0.13`=13%.

3. Suppose that atgas station across the street, prices are always 20% higher than Bob's. In absolute dollar terms, the difference between Bob's prices and the prices across the street is (blank) when gas costs $3.85 than when gas costs $3.35.

In this question we are looking for the difference of a difference.

If the proces across the street are always 20% higher, to find how much the gallon costs just multiply the price by 1.20, to increase 0.2 or 20%:

$3.85 * 1.20= $4.62.

Now, to see how much expensive this price is compared to Bob's, take de difference between the prices:

$4.62 - $3.85= $0.77.

Do the same to find the difference between the gas prices when the price is $3.35.

$3.35 * 1.20= $4.02.

$4.02 - $3.35= $0.67.

Now, find the difference of those differences:

$0.77 - $0.67= $0.1.

4. Suppose the Fed raises the target for the federal funds rate from 2% to 2.25%. This change of percentage points means that the Fed raised its target by approximately (blank).

Find the difference between percentages:

2.25% - 2%= 0.0225 - 0.02= 0.0025= 0.25%.

Simpler method:

2.25% - 2%= 0.25%.