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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 $2.38 $2.51 $2.62 $2.76 Price Level 151 155 157 160 Price Adjustment Real Price

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Expert Solution

Price adjustment real price = Current price * Price Level in Base Year / Price Level in Current Year

Year Nominal Price Base Price Level CY Price Level Price Adj Real Price Calculation
2001 2.38 151 151 $                        2.38 = 2.38 * 151 / 151
2002 2.51 151 155 $                        2.45 = 2.51 * 151 / 155
2003 2.62 151 157 $                        2.52 = 2.62 * 151 / 157
2004 2.76 151 160 $                        2.60 = 2.76 * 151 / 160

jeff jeffy answered 1 year ago
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