Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows:

20 pizzas at $10 each Rent of apartment, $600 per month Gasoline and car maintenance, $100 Phone service (basic service plus 10 long-distance calls), $50 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. (LO5)

a. Find the CPI in the subsequent year and the rate of inflation between the base year and the subsequent year.

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?