Macroeconomics: An Insight into the Canadian Economy

Running head: ECONOMICS
Macroeconomics
Name of the Student:
Name of the University:
Author Note:

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Introduction:
The essay provides an insight into the Canada. It commences with the present state of
economy and goes on to discuss the macroeconomic policy of the country thereby discussing the
various economic aspects like GDP, present rate of unemployment, present stage of the business
cycle, monetary and fiscal policy, exchange rate policy and the performance of the countries in
coming years.
Discussion:
The current state of the economy of Canada is referred a mixed economy which is highly
developed having the tenth largest Gross Domestic Product (GDP) through nominal and the
sixteenth largest Gross Domestic Product (GDP) through Purchasing Power Parity (PPP) across
the world. In comparison to the developed nations, the economy of the country remains
dominated by service industry those employees closer to about three quarters of the Canadians.
The nominal GDP of Canada was reported at about 2.052 percent in December 2018
which shows a decline from previous year when it was recorded at 4.356 percent in September
2018(Statistics Canada, 2018).The real GDP growth on the YoY data is quarterly updated in
Canada. It however stood at 3.1 percent from 1962 to 2019 for the month of March. This data
stood at all time higher of about 9.3 percent for March 1962 while it recorded all time lower of
about -4.1 percent for the month of December 1982(ceicdata.com, 2019) In Canada, the GDP
per capita reached at 46,409.8 USD for the month of June 2018 while the gross rate of savings
has been measured at about 18.6 percent for the month of March 2019.
The unemployment rate of the country remained lower than 6.0 percent in August
2017(Ragan, 2017). It is also to be noted that the unemployment rate was closer to 5.8 percent in

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the month of January which was higher than 5.6 percent recorded in the month of December. The
country has an inflation rate of 2 percent in the month of April which has been higher than the
recorded 1.9 percent in the month of March. The interest rate of the country has been raised by
25bp to about 1.75 percent which represented an overall increase in 1.25 percent. The exchange
rate of the country has been 1 Canadian Dollar being equivalent to about 0.75 USD
(tradingeconomics.com, 2019).
When equilibrium is achieved at output below the potential GDP then there is existence
of recessionary gap while when equilibrium at real GDP exceeds the potential GDP then a
country experiences inflationary gap. Canada experiences recessionary gap since the potential
GPP portrayed by the long run aggregate supply curve (LAS) lies above the equilibrium
(Champagne, Poulin‐Bellisle & Sekkel, 2018).
Figure 1: Long Run Equilibrium: Shift in the Aggregate Demand
Source: (Berger & Kempa, 2014)