Question

Earthquakes and GDP: Suppose the rural part of a country is hit by a major earthquake that destroys 10 percent of the country's housing stock. The govern- ment and private sector respond with a major construction effort to help rebuild houses. Discuss how this episode is likely to affect (a) the economic well-being of the people in the country and (b) the economy's measured GD. WORKED EXERCISE 1. What counts as GDP (I)

Answer 1

Meaning of GDP, & impact of disaster earthquake on GDP & welfare level

Step-by-step explanation:

Rural Earthquake hit would reduce the level of economic well being, as people's homes would be destroyed, this would be a huge capital loss (of real estate) with pressure of homelessness.

GDP ie Gross Domestic Capital formation is the total value of goods & services produced by an economy during a given period of time. GDP would also fall, due to the loss of infrastructural capital formation, which is a part of GDP.