Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows: • 10 pizzas at $12 each • Rent of apartment, $750 per month • Gasoline, car insurance, and maintenance, $150 • 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 $15 each, apartment rent is $810, gasoline, car insurance, and maintenance have risen to $170, and phone service has dropped in price to $40

Computation of CPI in the subsequent year and the rate of inflation between the base year and the subsequent year:

Cost of CPI Basket of Commodities in the Base Year = 10 * Price of pizzas + Apartment rent + Gasoline and car maintenance charges + Phone service charges 

= 10 * $12 + $750 + $150 + $50 

= $1,070

Cost of CPI Basket of Commodities in the Subsequent Year = 10 pizzas * Price of pizzas + Apartment rent + Gasoline and car maintenance charges + Phone service charges 

= 10 * $15 + $810 + $170 + $40 

= $1,170

CPI in the base year = 100

a. CPI in the Subsequent Year = Cost of CPI basket of commodities in the subsequent year/Cost of CPI basket of commodities in the base year

= ($1,170/$1,070) * 100 

= 109.346

Rate of Inflation between the Base Year and the Subsequent Year = [(CPI in subsequent year - CPi in base year)/CPI in base year] * 100 

= [(109.346-100)/100] * 100 

= 9.3%