George and John, stranded on an island, use clamshells for money. Last year Geor

Question

George and John, stranded on an island, use clamshells for money. Last year George caught 300 fish and 11 wild boars. John grew 200 bunches of bananas. In the two-person economy that George and John set up, fish sell for 2 clamshells each, boars sell for 10 clamshells each, and bananas go for 5 clamshells per bunch. George paid John a total of 30 clamshells for helping him to dig bait for fishing, and he also purchased five of John’s mature banana trees for 30 clamshells each. What is the GDP of George’s and John’s island in terms of clamshells?

Explanation / Answer

The market value of production is (300 fish x 2 clamshell each) + (11 boars x 10 clamshells each) + (200 bunches of bananas x 5 clamshells each) =600 +110 + 1000 = 1710. The digging bait represents an intermediate service, which is not counted in GDP, nor is the purchase of an existing asset (mature banana trees) counted in GDP. So the GDP of the island is 1710 clamshells.

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