Question

Let’s figure out GDP for Robinson Crusoe (RC) stuck on a desert island Initially RC is stuck on an island without much wisdom and local knowledge. Because RC is a proper Englishman, he wants to keep records of things. This year, he catches and eats 2,000 fish valued at one dollar each, grows and eats 4,000 coconuts valued at 0.50 cents each, and makes 2 huts (housing) valued at $200 each. Now, using the following:

A) If government purchases are zero and there is no trade, what is C for Crusoe? What is I? What is Y? (We are going to start using those letters as if they mean something).

B) Next year, RC learns of a tribe on a nearby island who are willing to trade with him: If he gives fish, they give clams. He produces just as much fish as before (in part A) , but he trades 500 of the 2,000 fish and receives 10,000 clams valued at 5 clams per dollar. What are the NEW dollar values of: the exported fish? the imported clams? What are C, and I? What is GDP (Y) now?

C) The following year, Crusoe produces the same as in every other year, but a tribe on the other side of the island steals his newly produced two huts, and gives him nothing in return. What are C, I, X, and Y now?

Answer 1