Economic History of Canada

› ?
 as hit hard by the   


. Beteen
1929 and 1939, the gross national product dropped 40% .
Unemployment reached 28% at the depth of the
Depression in 1933. Many businesses closed, as corporate
profits of $396 million in 1929 turned into losses of $98
million in 1933. Canadian exports shrank by 50% from 1929
to 1933. Worst hit ere areas dependent on primary
industries such as farming, mining and logging, as prices fell
and there ere fe alternative jobs. Families sa most or
all of their assets disappear and their debts became heavier
as prices fell.
› ëhe causes of the Great Depression ere-
› G  

G  


- Canadian companies expanded
their industries so they could generate more profits, but economic
activity shrank, and companies ere left exposed ith heavier debt
and a lack of cash flo.
›  


 
- ëhe decreased demand for
natural resources created a significant drop in Canadian sales, leading
to an economic depression.
›  



 
- Due to the dependency Canada
had on the U.S., hen an economic depression hit the States, Canada
as thrust into one as ell.
›  
- Canada's efforts to get out of a recession by raising
export tariffs only backfired due to competition from other countries
and Canada's lack of variety in its exports.
› ? - Canadians bought too much on lease and credit,
including stocks. ëherefore hen the stock market crashed (partly due
to the credit buying), Canadians ere in debt and faced a trying time
as they attempted to sell their personal belongings, hich in many
cases led to repossessions of partly paid-for purchases.
 Vnflation Rate
› Vnflation rate refers to a general rise in prices measured
against a standard level of purchasing poer.
› ëhe most ell knon measures of Vnflation are the CPV hich
measures consumer prices, and the GDP deflator, hich
measures inflation in the hole of the domestic economy.
› When e talk about 
 
 

?
 , this often
refers to the rate of inflation based on the consumer price
index, or CPV for short. ëhe Canadian CPV shos the change in
prices of a standard package of goods and services hich
Canadian households purchase for consumption. Vn order to
measure inflation, an assessment is made of ho much the
CPV has risen in percentage terms over a give period
compared to the CPV in a preceding period. Vf prices have
fallen this is called deflation (negative inflation).
› ëhe inflation rate in Canada as last reported at 1.90
percent in September of 2010. From 1915 until 2010, the
average inflation rate in Canada as 3.26 percent reaching
an historical high of 21.60 percent in June of 1920 and a
record lo of -17.80 percent in June of 1921.
› ëhe most ell knon measures of Vnflation are the CPV
hich measures consumer prices, and the GDP deflator,
hich measures inflation in the hole of the domestic
economy.
› Canada's consumer price index rose 1.9 percent, after a 1.7
percent gain in August. ëhe core rate that excludes eight
volatile items such as gasoline sloed to 1.5 percent from
1.6 percent, the sloest pace since December.
 Vmplications of Vnflation
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Vnflation reduces the purchasing poer of money over time.

High and unstable inflation can be costly. Vt undermines the economy's ability to
generate long-lasting gains in output, incomes, and employment. Vt creates
uncertainty for consumers, businesses, and investors, and erodes the value of
incomes and savings.
People on fixed incomes, including many elderly and less ell-off Canadians, are
particularly vulnerable to high inflation, since it erodes the value of their
investment income or social benefits (pension, alloance, etc.).
High inflation and expectations of high inflation also encourage speculative
activities rather than investments that increase production capacity and enable
firms to stay competitive at home and abroad.
› 
 
Price stability is a situation here inflation is lo enough that it no longer has a
material effect on people's economic decisions.
Canadian monetary policy is aimed at promoting price stability and harnessing the
benefits of lo inflation.
 Causes of Vnflation
1)Vncrease in the money supply in the economy or increase in the velocity
of the circulation of money.
2)Vncrease in the government expenditure in the economy.
3)Deficit financing is an important cause of inflationary rise in the prices.
4)Vncrease in the population groth of the economy. Vt is a very important
cause of rise in the basic food prices in a developing country like Vndia.
5)Vncrease in the export of the economy. Vt creates a shortage of
commodities in the domestic market.
6)Vncrease in indirect taxes like sales tax. Vt increases the cost of
production for the producers. Hence they raise the prices of their
manufactured items.
7)Decrease in indirect taxes like income tax.
8)Vncrease in hoardings, profiteering and black marketing. When people
are engaged in black and illegal activities, demand for essential and luxury
items rises.
9)Vncrease in age rates. Vt causes the producers to raise the prices of
their goods to balance their profits.
 èeed to Control Vnflation
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A credible commitment by the monetary authorities to
keeping inflation lo and stable provides a climate
conducive to sound economic decisions. Vt also leads to
loer interest rates, supporting productive investments
that allo the economy to gro at a sustainable, non-
inflationary pace over time and to generate higher
incomes and ne jobs.
ëhus, the focus on lo inflation is the best contribution
monetary policy can make to the economic and
financial elfare of Canadians.
 Controlling Vnflation
› ëhe central bank͛s mandate is to set interest rates to keep inflation as
close to 2 per cent as possible.
› Canada's annual inflation rate dropped in èovember due to loer gas
prices but the closely atched core rate increased sharply, and some
analysts said this could eaken the case for the Bank of Canada making
more aggressive interest rate cuts to stimulate the economy.