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suppose that early in a year, hurricane hots a town in Florida and destroys a substantial number of homes. A portion of this stock of housing, which had a market value of $100 million (not including the market value of the land), was uninsured . the owners of the residence spent a total of $5 million during the rest of the year to pay salvage companies to help them save remaning belongings. A small percentage of uninsured owners had sufficient resources to spend a total of $15 million during the year to pay construction companies to rebuild their homes. some were able to devote their own time, the opportunity cost of which was valued at $3million, to work on rebuilding their homes. The remaning people however, chose to sell their land at its market value the combined effect of theses houses. what was the combined effect of theses transactions on GDP for this year? (hint: which transaction took place in the market for final goods and servies?) in what ways , if any does the effect on GDP reflect a loss in welfare for theses individuals?

Macroeconomics, Economics

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