Suppose a typical consumer market basket in a region is weighted 20 percent for food, 15 percent for energy, and 65 percent for everything else. Suppose the rate of inflation for food is 10 percent, for energy is -10 percent, and for everything else is 4 percent for 2023.

a. What is the rate of inflation for 2023?

b. If the Consumer Price Index for 2022 is 100, what would it be for 2023?

c. Suppose that the price of gasoline in this region is $4.80 a gallon in 2023. What is the real price of gasoline in 2022 dollars?

d. If the 30-year mortgage interest rate is 6.84 percent, what is the real rate of interest, given the rate of inflation calculated in (a)?

e. You decide to ask for a raise for next year based on the rate of inflation as measured by the CPI. If the CPI in 2024 is expected 110, what percentage raise for 2024 should you ask for?

f. You asked for the raise to protect yourself from inflation. What are two problems with the calculation of the Consumer Price Index might make the raise you asked for inaccurate measure of what is happening to prices?