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tonyrod617
tonyrod617
30.01.2020 • 
Business

Suppose that early in a year, a hurricane hits 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 residences spent a total of $6 million during the rest of the year to pay salvage companies to them save remaining belongings. a small percentage of uninsured owners had sufficient resources to spend a total of $16 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 $3 million, to work on rebuilding their homes. the remaining people, however, chose to sell their land at its market value and abandon the remains of their houses. what was the combined effect of these transactions on gdp for this year? (hint: which transactions took place in the markets for final goods and services? ) in what ways, if any, does the effect on gdp reflect a loss in welfare for these individuals?

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