Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin

Exercise 4

When the price of gasoline rose to $4 from $2 per gallon, media commentators spoke as though people were headed to the poor house as a result. But here are some other facts: The average car is driven about 12,000 miles per year and gets about 24 miles per gallon. Even if people did not drive less when the price rose, by how much did the average driver's "real" income fall due to the $2 per gallon rise in the price of gas? Given that per capita income is about $55,000 per year, what is this income change in percentage terms? Show all calculations.