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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
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 V or V . Between Mayr 1 and June 1, Bob's price decreased by V , or V . 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 V 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 V percentage points means that the Fed raised its target by approximately V
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