Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows:20 pizzas, $10 eachRent of apartment, $600 per monthGasoline and car maintenance, $100 per monthPhone service (basic service plus 10 long-distance calls), $50 per monthIn the year following the base year, the survey takers determine that pizzas have risen to $11 each, apartment rent is $640, gasoline and maintenance have risen to $120, and phone servicehas dropped in price to $40Instructions: Enter your responses by rounding the CPl to three decimal places and the rate of inflation to one decimal place.a. Find the CPl in the subsequent year and the rate of inflation between the base year and the subsequent year.CPI:Rate of inflation:b. The family's nominal income rose by 5 percent between the base year and the subsequent year. Are they worse off or better off in terms of what their income is able to buy?The family is(Click to select)

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Asked Nov 10, 2019
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Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows:
20 pizzas, $10 each
Rent of apartment, $600 per month
Gasoline and car maintenance, $100 per month
Phone service (basic service plus 10 long-distance calls), $50 per month
In the year following the base year, the survey takers determine that pizzas have risen to $11 each, apartment rent is $640, gasoline and maintenance have risen to $120, and phone service
has dropped in price to $40
Instructions: Enter your responses by rounding the CPl to three decimal places and the rate of inflation to one decimal place.
a. Find the CPl in the subsequent year and the rate of inflation between the base year and the subsequent year.
CPI:
Rate of inflation:
b. The family's nominal income rose by 5 percent between the base year and the subsequent year. Are they worse off or better off in terms of what their income is able to buy?
The family is
(Click to select)
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Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows: 20 pizzas, $10 each Rent of apartment, $600 per month Gasoline and car maintenance, $100 per month Phone service (basic service plus 10 long-distance calls), $50 per month In the year following the base year, the survey takers determine that pizzas have risen to $11 each, apartment rent is $640, gasoline and maintenance have risen to $120, and phone service has dropped in price to $40 Instructions: Enter your responses by rounding the CPl to three decimal places and the rate of inflation to one decimal place. a. Find the CPl in the subsequent year and the rate of inflation between the base year and the subsequent year. CPI: Rate of inflation: b. The family's nominal income rose by 5 percent between the base year and the subsequent year. Are they worse off or better off in terms of what their income is able to buy? The family is (Click to select)

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Expert Answer

Step 1

The Consumer Price Index (CPI) refers to a statistical estimate which is calculated using the prices of a sample of items in different years. It can be calculated by using the following formula:

 

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Cost of basket in current year -x100 Cost of basket in base year

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Step 2

(a) Cost of basket in the base year is calculated below:

20(10) + 600 + 100 + 50 

= 200 + 600 + 100 + 50 

= 950

The cost of the same basket of goods in current year is calculated below:

20(11) + 640 + 120 + 40

= 220 + 640 + 120 + 40

= 1,020

Step 3

The Consumer Price Index is calcu...

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Cost of basket in current year -x 100 Cost of basket in base year 1,020 x100 950 10,200 x100 95 =107.37

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