Question

In: Finance

The nominal price (per pound) of apples for each year is shown in the timeline below....

The nominal price (per pound) of apples for each year is shown in the timeline below.

What is the real price of apples in year 2002 (as seen from year 2001).

Calculate your answer to the nearest penny (e.g., 3.81)

Year 2001 2002 2003 2004
Nominal Price $2.5 $2.54 $2.7 $2.8
Price Level 151 155 157 158
Price Adjustment
Real Price

Solutions

Expert Solution

Price adjustment Real Price = Current Price * Base Year Price Level / Current Year Price level

Year Nominal Price Base Price Level CY Price Level Price Adj Real Price Calculation
2001 $              2.50 151 151 $                        2.50 = 2.5 * 151 / 151
2002 $              2.54 151 155 $                        2.47 = 2.54 * 151 / 155
2003 $              2.70 151 157 $                        2.60 = 2.7 * 151 / 157
2004 $              2.80 151 158 $                        2.68 = 2.8 * 151 / 158

jeff jeffy answered 1 year ago
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