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IB SL Economics Commentary: Macroeconomics

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IB Economics: Internal Assessment Front Cover Name: Candidate Number: 310187471 Teacher: Mr. Messere Source of Article: The Toronto Star: Title of Article: Booming GDP beats forecasts, http://www.thestar.com/business/article/773531--booming-gdp-beats-forecasts Date Written: March 5, 2010 Word Count: 726 Areas of Syllabus your commentary relates to: Section 4: Macroeconomics Having experienced contraction from Q4 08 to Q2 09, the Canadian economy grew 5% in the fourth quarter of 2009, beating predicted forecasts. This growth was precipitated by consumer and government spending, as well as a growing housing market. There was also growth recorded in exports, with sectors such as the automotive, energy and industrial factoring into this. However, economists warn that for this growth to continue, issues such as unemployment and spotty aggregate demand must be addressed. Fiscal measures, meaning decisions made by the central governing body concerning taxation and government spending, have already been taken by the Canadian government, in the form of the fiscal stimulus package. ...read more.


to AD1 (l). There mismatch in skills offered by Canadian workers and those demanded by firms has decreased on the diagram, perhaps through training programs. On the other hand, an increase in aggregate demand, caused by an increase in the disposable income of families may have also caused the increase in demand for labour as firms expanded or rehired laid off personnel. Price stability is also important for long term economic growth, because rampant inflation, meaning a steady and prolonged increase in the price level, is known to have several adverse effects. These include the extra costs caused by unsteady resource costs, and money losing its role as a medium of value. As the government injects more stimuli into the economy, the risk of demand pull inflation grows. Thus aggregate demand would rise; because of growth in the money supply, the price level would increase, as described by the short run equation of exchange, M=P. ...read more.


Additionally, the retraining programs are unlikely to have already decreased structural unemployment, as one of their major faults is the length of time needed to complete such a course. These so called time lags are problematic because once the retrained populace makes their way back into the labour market, 3-4 years may have passed, almost a full cycle of certain economies. As stated in the article, the Canadian recovery itself does not stand on stable ground, especially so given that a significant part of the EU is heavily in debt and America no yet out of its own recession, important, as 80% of Canadian imports are destined there. Whether or not the measures taken by the government with respect to stimulating the Canadian economy in the long run shall be successful remains to be seen. However, the average middle class citizen most likely has experienced the benefits of measures ranging from tax credits and reductions to funding directed to the industry they work in. ...read more.

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