Canada's Currency And Its Effect On The Economy

Canada has a free market economy. A free market economy allows people to freely buy, sell, and produce what they want, with limited government interaction. Canada is also split into four economic regions, Atlantic, Central and Eastern, the West, and the North. In the Atlantic Provinces, fishing is the major industry. Because of overfishing, however, the area has moved to manufacturing, mining, and tourism. In the Central and Eastern regions, the paper and lumber industry are important to the region. It is also the leading financial and industrial center. To the West, farming and ranching are major activities in the region. This area produces large amounts of wheat to export. They also have the world’s largest natural gas and oil reserves.

There are numerous reasons for the sudden decline in value of Australian currency, one of which is the renewed strength of the US dollar, due to the American economy’s acceleration through its recovery. However, there is the additional fact that the RBA has been cutting interest rates, resulting in Australia becoming a less attractive place for investors, as well as the continual impacts of deteriorating commodity prices

One needs to have a base level understanding of what defines an exchange rate. According to Investopedia, a foreign exchange rate is “The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.”(Investopedia, 2012) The process by which foreign exchange rates are determined is really not any different than any other

As Canada was maturing, many currencies were circulating throughout the colonies. “It was not until the Province of Canada’s revised Currency Act of 1857 that dollars and cents were recognized as the only official units of Canadian currency” (Vardy, J., 2005, p 3) “Silver and bronze coins, denominated in cents and bearing the word “Canada” issued for the first time in 1858, were the first distinctive Canadian Currency”. This currency was referred to as Dominion Notes and could be issued by “commercial banks, private enterprises and governments” (Vardy, J. , 2005,p 3). These notes “became the official currency of Canada in 1876” (Vardy, J., 2005, p 3).

Pierre Trudeau once said, “Living next to you (the United States) is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt.” This saying gives a deep understanding of what Canada’s relationship with the States was like. The U.S. is a country that has flourished throughout history and Canada was right behind. The U.S has almost 10 times more the population than Canada. So, Canada has depended on the U.S for simple things such as getting tourists from them to visit Canada. It is evident that Canada’s dependence on the U.S, was higher than America’s dependence on Canada.

Even though some believe that the dollar is valued too high, it does not mean it should fall against the US dollar in the future. The Canadian dollar in recent years shows that it is almost impossible to accurately predict the evolution of exchange rate. Exchange rates depend on too many things. Economic and political conditions in the United States are some factors. The adaptation of the Canadian economy to a stronger Canadian dollar. Although Canadian dollar varies, I see good from it in the near future but it will not surpass the American

An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from

In 2008 when the global economy took a turn for the worst Canada managed to come out on top. This is thanks to the export of natural resources and commodities. The Canadian government immediately took charge and start making budget cuts in order to have a full recovery by 2015. (D.R., 2011) Canada has a large threat in its path; its dependence on the outside world.

The government has an enormous influence on the economy of its nation. As of November 2015, Canada will be under the leadership of Justin Trudeau and his Liberal party. The article predicts how the newly elected government will influence the Canadian economy. The government affects the economy through the manipulating the value of its currency, government bonds, and annual spending. Factors such as interest rates and government debt would affect a nation’s currency and consequently, the economy. Government bonds help determine interest rates. Annual spending on government projects, such as infrastructure, would increase the GDP (Gross Domestic Product) of a country. GDP increases will boost the economy.

Canada’s economy is currently growing and statistics show the economy is expected to continue to grow in the following years. In addition, consumer spending has increased and the housing market conditions have improved. The demand for oil and energy is at an all-time high and the demand is expected to increase through 2017. However, expanded a business into a new market also comes with high risks and potential losses. Major corporations such as Target have tried to enter the Canadian market, but ended up failing and losing profits. In this section, I will discuss economic conditions, business conditions, and risks.

These developments are having a further negative impact on Canada’s fiscal outlook. It is important to note that the country’s oil sector is also its largest export industry (McCarthy, 2014). In recent years, members of the Organization of the Petroleum Exporting Countries (OPEC) – major suppliers of crude oil to the world market – have increased both their production and supply, in order to make oil production and export more profitable for themselves, and less profitable for producers in North America (Esparza, 2015). The abundance of oil on the world market has driven the cost per barrel down, negatively impacting Canada’s ability to derive economic benefit from our own costly activities aimed at oil extraction and production (Esparza, 2015). This confluence of factors is leading to a poor economic outlook for the current year and

Gasoline is a essential resource to most family’s daily life. The price of oil has plunged dramatically and reached the level that was last seen during the recession of 2009, even though it has started to bounce back a little bit. Brent crude, the international benchmark of oil price, was around $53 a barrel at the end of January 2015. The constant decline of the oil price may have affected all oil-producing countries, including Canada. The experience of plunging oil price and deprecation of the Canadian dollar lead me to analyze how Canadian economy was hit or benefited by low oil price.

Summer is approaching and with it is coming a rise in prices. Canadians can expect to pay more for meat, salad ingredients and beer says a TD economist. This is once again in result of falling gasoline prices. The effect of a lower loonie is already making itself felt in the market. Meat was up 12.4 per cent last month, while vegetables rose 8.4 per cent compared to a year earlier. And many economists predict that it will only continue to rise. The drop in the Canadian dollar over the past couple of years is starting to exert a more visible impact on Canadian consumer prices. The dramatic decline in the Canadian dollar over the course of the past two years could increase consumer prices by 0.8 per cent this year. The loonie has sunk 30 per cent since late 2012 as the global price of

But the currency effect is not a continuing trend; it largely depends on the currency exchange rate.

Li Tiandong and Jiang Boke (2006) point out that the relationship between exchange rate and employment depends on the coaction of three mechanisms: (1) the effect of exchange rate changes on aggregate demand; (2) the effect of exchange rate changes on prices of capital goods; (3) the substitution effect of exchange rate changes on the relationship between physical and human capital.[4]