On April 1, the price of gas at Bob’s Corner Station was $3.40 per gallon. On May 1, the price was $3.90 per gallon. On June 1, it was back down to $3.40 per gallon. Between April 1 and May 1, Bob's price increased by or
Between May 1 and June 1, Bob's price decreased by or

Suppose that at a 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 $3.90 than when gas costs $3.40.

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 2.5%. This change of percentage points means that the Fed raised its target by approximately

1. Bob's Corner Station:

Prices of Gas per gallon:

Between April 1 and May 1, Bob's price increased by___$0.50 or 14.7%

Between May 1 and June 1, Bob's price decreased by ___$0.50 or 12.82%.

2. In absolute dollar terms, the difference between Bob’s prices and the prices across the street is___$0.02 when gas costs $3.90 than when gas costs $3.40.

3. Suppose the Fed raises the target for the federal funds rate from 2% to 2.5%. This change of ___25 percentage points means that the Fed raised its target by approximately 25%

Explanation:

a) Computation of Price Increases:

i) Gas at Bob's

Between April 1 and May 1, price increased by $0.50 ($3.90 - $3.40)

This is an increase of 14.7% ($0.50/$3.40 x 100).

Between May 1 and June 1, price decreased by $0.50 ($3,90 - $3.40)

This is a decrease of 12.82% ($0.50/$3.90 x 100)

ii) When gas costs $3.40 at Bob's, the price at the other gas station will be $4.08 ($3.40 x 1.2), a difference of $0.68 ($4.08 - $3.40).

iii) When gas costs $3.90 at Bob's, the price at the other gas station will be $4.68 ($3.90 x 1.2), a difference of $0.78 ($4.68 - $3.90).

iv) So in absolute terms, the dollar difference is $0.02 ($0.78 - $0.68) when gas costs $3.90 than when gas costs $3.40.

v) Percentage and percentage points describe the relationship between two sets of data.  Percent refers to the rate of change, whereas percentage point measures the actual amount of change.

vi) The percent change in our case is calculated as follows:

Change in Rate divided by Former Rate = (2.5 - 2)/ 2 = 0.25 = 25%.

The percentage point of 25% = 25.

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