The Canadian Economy : An Overview And Response

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Jimmy Yuan Kristen Kang CIA4UP March 4 2016 The Canadian Economy: An Overview and Response Canada’s wakeup call has arrived in the midst of economic decline. Canadian economic activity has been recently weaker than was anticipated due to a number of reasons. The falling loonie, low commodity prices, lower business investment and weakening employment performance have contributed to its failure. Although Canada’s fourth-quarter 2015 annualized Gross Domestic Product (GDP) growth rate rose by 0.8%, its growth has been restrained by both a 12.4% drop in business investment that subtracted 1.2 points from overall GDP increase (Royal Bank of Canada 2016). Canadian employment rose up to 7.2% in January 2016 with a sharp increase in the ratio of…show more content…
There are three general types of indicators: Leading, Coincident, and Lagging. Leading indicators signal future events. Things such as stock market return are a leading indicator. The stock market usually decline before the entire economy declines and vice versa. The coincident indicator changes at the same time of the economy. Personal income is an example of a coincident indicator. High personal income will coincide with a strong economy. The lagging indicator is used to confirm that a pattern is occurring or about to occur throughout the economy. Unemployment is a lagging indicator. When the unemployment rate is rising, the economy is doing poorly. While the Bank of Canada is unable to control the money supply directly because of the changing demand by private banks, the Bank of Canada can indirectly influence the money supply by altering interest rates or the level of banking reserves. By using current economic indicators and a prediction of Canada’s economic future, I will develop an appropriate monetary policy proposal to help expand Canada’s economy. 3.0 Inflation-Control Target and Exchange Rate Since the 1990s, Canada’s monetary policy has been built on a framework of stabilizing inflation at a target rate of two percent (Bank of Canada n.d.). Through expansionary or recessionary monetary policy, Canada must maintain its inflation rate to ensure that inflation is manageable. Canada’s currency, the
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