The following table shows an estimate of the destruction caused by the terrorist attacks of September 11:

Type of Property…………………………………. Estimated Loss

World Trade Center……………….………………. $ 6.7 billion

Complex buildings

Contents of buildings in……………….………………. $ 5.2 billion

World Trade Center

Complex

Buildings nearby……………….……………….………$ 4.5 billion

Public infrastructure……………….……………….…..$ 3.7 billion

(subway, commuter rail,and utilities)

Total……………….……………….…………………. $20.1 billion

Use the following two facts (from the Bureau of Economic Analysis) as needed to answer the questions below:
Fact #1: GDP in 2001 was $10 trillion.
Fact #2: Manhattan produces 1.5 percent of the nation’s GDP.
a. Assume that each dollar of destroyed property reduces annual production by 10 cents (a rough estimate of the general impact of capital destruction on GDP), and that none of the destroyed property was replaced over the following 12 months. Estimate the percentage impact on GDP during the 12 months after the attacks due to the physical destruction alone.
b. Suppose that, in addition to the property destruction, the attack created disruption of economic activity, and that Manhattan’s production was cut in half for 2 weeks. Estimate the percentage impact on GDP for the quarter due to this disruption alone.

c. Again, suppose Manhattan’s production was cut in half for 2 weeks. Estimate the percentage impact on GDP for the year due to this disruption alone.