Questions: 1. Alexandria, a British citizen, owns and manages a fish and chips shop in Washington, D.C. She buys fresh food produced by U.S. workers, pays utilities to a U.S. company, and employs only U.S. citizens. What part, if any, of the restaurant's production is included in U.S. GDP? What part, if any, of the restaurant's production is included in U.S. GNP? 2. List the five steps for calculating the consumer price index and inflation rate. 3. Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator. 4. A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. a. Using 2010 as the base year, what is the CPI in each year? b. Using 2010 as the base year, what is the inflation rate in 2011? Good X Good Y Quantity Price Quantity Price 2010 50 $100 100 $10 2011 60 $120 120 $12 5. Explain the distinction between technological knowledge and human capital