Answer the Following Questions

question 192

Essay

Answer the following questions:
a.In 2004, four major hurricanes hit Florida. Explain how this destruction of property, and the rebuilding that went on afterward, affected GDP.
b.Explain how GDP has trouble accounting for other parts of the economy as well.

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Definitions:

Risk Premium

The extra return expected by an investor for holding a risky asset instead of a risk-free asset, serving as compensation for bearing additional risk.

Arbitrage Opportunity

An arbitrage opportunity is the chance to buy an asset at a low price in one market and sell it at a higher price in another, taking advantage of the price difference for profit.

Expected Return

The anticipated amount of returns an investment is expected to generate, calculated as a weighted average of possible returns, based on their probabilities.

Risk-free Rate

The theoretical return on an investment with zero risk, often represented by the yield on government securities like U.S. Treasury bills.