Problem# 1

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

20 pizzas at $10.00 each

Rent of apartment, $600.00 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

Pizza $11 each

Apartment rent is $640

Gasoline and car maintenance, $120

Phone service (basic service plus 10 long-distance calls), $40

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

The familys nominal income rose by 5% 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?