Consider the following responses to the event of a hurricane. For this discussion: you do not need to provide an answer for each of the owners' responses, but do give your economics reasoning to support the conclusion that you've drawn with respect to the impact on GDP.
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 $5 million during the rest of the year to pay salvage companies to help them save remaining 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 $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.