Essays on Economics Essay

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The Current and Future State of the Canadian EconomyExecutive SummaryCanadian economy’s performance has been robust. In the last decade, Canadians enjoy extremely high living standards as compared to the rest of the world. The economy is experiencing major structural changes due to increasing commodity prices, mounting oil and gas production and the appreciation of the Canadian dollars and has demonstrated a remarkable capability to maintain its economic performance. In the near future, the main challenges for both the federal and the provincial governments will be to enhance productivity and to maintain the current economic status.

IntroductionCanada is a prominent member of the group of developed nations. The external manifestation of this is its membership in a variety of trade agreements like FTA (Free Trade Agreement) and NAFTA (North American Free Trade Agreement), Group of Eight (G8) etc (Howlett 1992). The unique feature of the Canadian economy which distinguishes it from the others is its synergy with the economy of USA. The Canadian economy is integrated with the US economy to such an extent that United States is responsible for over 85 % of its exports and 75 % of its imports (Howlett 1992).

It is important to identify the strengths of the Canadian economy. The predominant factors of the Canadian economy are its affluence in the various natural resources, a robust manufacturing sector, a developing services sector, a responsive network of financial institutions. More importantly the services sector is responsible for employing over 75 % of the Canadian Workforce (Howlett 1992). Canada experienced a deep economic recession a couple of decades ago (1987 to 1991). The recession was characterized rising budgetary deficits, increasing unemployment, and overall disaffection with the economic policies of the government.

The poor economy led to a change in the government and had political consequences like an increase in the demand for sovereignty of the Quebec province of Canada (Howlett 1992). Canada is a free market economy modeled on the USA but there is increased tolerance for state intervention in various economic policies than the United States of America. In the first decade twenty first century, Canadian economy has been developing steadily with a significant decrease in unemployment and the generation of considerable government surpluses.

In the past decade the Canadian dollar has appreciated considerably in the world market (Howlett 1992). Quantifying the Canadian EconomyThe Gross Domestic Product (GDP) is a good indicator of the size of the economy. Gross domestic product (GDP) is a popular indicator used to estimate the value of economic activity. GDP quantifies two aspects at once over a given period of time: the total income and the total expenditure. This section will analyze the various types of expenditures which contribute to the GDP.

The domestic consumption or the private consumption includes the expenditure incurred by a family on a recurring basis like food, rent, medicinal expenses etc. This is difficult to quantify (McKinsey Global Institute 1999). Next component is Capital investment, the hallmark of capital investment is that money is exchanged for either goods or services; another important hallmark is that after the exchange, there is no liability on the provider of the goods or services for repayment at a later stage (McKinsey Global Institute 1999). After having quantified the domestic and the private sector, it is essential to quantify the expenditure incurred by the government.

As a rule it includes the salaries paid to the government servants and the expenses incurred by the government towards the infrastructure establishment. An important aspect to be borne in mind while estimating the GDP is that all expenditure which does not translate either into physical goods or services provided is not included into the GDP. This includes savings in banks, mutual funds, investments in stock markets etc (McKinsey Global Institute 1999). The final type of expenditure is the net exports.

This is the net difference between the exports and imports of the country (World Bank 2002).

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