Consider a year in which there is a major hurricane, such as Ike in 2008, which causes $400 billion in damages. In the next year, real GDP increases by $400 billion as a result of rebuilding and repairing the damage caused by the hurricane.
For Critical Analysis:
Can we say that the United States is $400 billion better off than before the hurricane as a result? Should the production in building and repairing homes be adding to our GDP figures during this period?
Comment on the following two questions for thought:
How would a sudden jump in U.S. construction material prices affect our GDP, specifically our Net Exports?
What exactly did Say mean when he said “supply creates its own demand”? Do you agree or do you think “demand creates its own supply”?
