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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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:

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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