Random
The increasing interconnection and interdependence of world economies, cultures, and populations, driven by cross-border trade, technology, and information exchange.
Globalization
Canada’s top trading partner
USA
- Increased economic health
- Experience by exchanging goods
- Build relationships with other countries
- Specialization (focusing on what they are good at producing)
Gains from trade
The natural, recurring fluctuations in economic activity—specifically real Gross Domestic Product (GDP)—around its long-term growth trend.
Business Cycle
Involves a central bank managing money supply and interest rates to promote economic stability, aiming for low, stable inflation.
Monetary Policy
A ____ is a short-term overspending, a _____ is a short-term excess of funds, and _____ is the accumulated total of past deficits minus any surpluses.
Deficit, Surplus, Debt
The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources, or to produce the same amount using fewer resources
Absolute Advantage
The difference between a government’s total revenues (taxes, fees) and its total expenditures (spending, transfer payments) over a specific period, usually a year.
Government Budget Balance
(MPC) measures the proportion of additional income that a consumer spends on goods and services rather than saving.
Marginal Propensity to Consume
The total quantity of all finished goods and services demanded in an economy at a given overall price level and time.
Aggregate Demand
A built-in fiscal feature, such as progressive taxes or unemployment insurance, that automatically moderates fluctuations in the business cycle without new legislation. They increase government spending or reduce tax revenue during downturns to boost demand, and do the reverse during booms.
Economic Stabilizer
A government-imposed trade restriction that sets a physical limit on the quantity or value of a specific good that can be imported into a country during a set time period
Import quota
The target overnight rate, or policy interest rate, is the interest rate set by the Bank of Canada as the desired average cost for major financial institutions to borrow and lend one-day funds among themselves. It is the primary tool to control inflation, targeting a 2% rate, and directly influences prime lending rates, mortgages, and personal loan rates.
Target Overnight Rate
The process by which a country's central bank (like the Bank of Canada or the Federal Reserve) manages the money supply and interest rates to influence the economy, aiming for low inflation, stable prices, and high employment. It involves setting targets for key interest rates to control borrowing, spending, and economic growth
Monetary Policy
Three principles that can guide government fiscal policy:
Annually balanced budgets, cyclically balanced budgets and functional finance
Structural features of government tax and transfer systems—such as progressive income taxes and unemployment insurance—that automatically temper economic cycles without new legislation. D2l: “Built-in measures such as taxes that lessen effects of the business cycle.”
Automatic Stabilizers
A type of intergovernmental agreement, often regional, where countries unite to reduce or eliminate barriers to trade—such as tariffs and quotas—among member nations
Trade bloc
An ______ is usually caused by an increase
in AD magnified by both households and
businesses spending more due to optimism
about the future.
Expansion
To produce a specific good or service at a lower opportunity cost than its trading partners
Comparative Advantage
Deliberate government actions—new laws or policy changes—taken to influence aggregate demand and stabilize the economy. Unlike automatic stabilizers, these require active, ad hoc decisions by policymakers (e.g., Congress) to alter tax rates or spending, typically during recessions to provide stimulus or during booms to cool inflation. D2l: “intentional government intervention.”
Discretionary Stabilizers
The two different inflations where consumer demand outpaces supply and in the other, rising production costs force prices to rise
Demand-Pull and Cost-Push inflation
Results from decrease in AD magnified by both households and businesses spending less due to pessimism about the future. May be a recession, which is a decline in real output for six months or more
Contraction
The difference between two types of policy in which one of them helps build a weak economy and the other helps cool a fast growing economy
Expansionary and contractionary policy
Your income goes up at the same rate as inflation
You’re fine. Prices go up, but so does your pay.
Your income goes up, but not as fast as inflation
Full Indexation and Partial indexation
This policy is managed by the government, not to be confused with a different policy managed through the central bank. This policy uses government spending and taxation to influence a nations economy- boosting aggregate demand to stimulate economic growth.
Fiscal policy, not monetary policy