Chapter 6 - Determination of National Income
"Canada's Economic Growth Slows in Q4", CBC News - February 28th, 2005
In 2004, the fourth quarter of Canada's economy grew at a slower rate than the rest of the year. Statistics Canada reported that the RGDP of the year 2004 had a total increase of 2.8%, rising only 0.4% in the fourth quarter. The previous quarter was at an increase of 0.7%, while the highest increase of the year came from the second quarter, with 1.1%. The annualized growth of the fourth quarter was only 1.7% in Canada, with the majority of the growth coming from domestic demand (with an increase of 1.1%), compared to the U.S.'s annualized growth of 3.8% in the final quarter. Corporate profits within Canada stayed the same as they were in the third quarter, at 1.5%, while exports and manufacturing profits declined. Inventories also rose by $19.2 billion in the final quarter, and businesses increased investments in machinery and equipment by 9.4% as corporate surpluses grew by 17.7%. However, Canadians continued to spend freely, causing the savings rate to decrease to its lowest since the 1930's.
Relation to Chapter 6
As reported by Statistics Canada, Canada's econonic growth has declined to a total growth of 2.8% in the year of 2004. This has been mainly due to the drastic increases in the Canadian dollar, which has caused all of manufacturing, exports, and corporate profits to suffer. Inventories rose by a fairly significant amount, but with the majority of the increase being accounted for by durable goods and wholesale trade and manufacturing. As investment by businesses increased, this would lead to an increase in aggregate demand, which in turn, would cause GDP to increase. Also, as consumers were continuing to spend and not save their income, the profits of financial institutions were harmed. The decrease of the savings rate could also partly be due to the low interest rates during the beginning half of the year, as with low interest rates, the opportunity cost of not saving would be less.
In 2004, the fourth quarter of Canada's economy grew at a slower rate than the rest of the year. Statistics Canada reported that the RGDP of the year 2004 had a total increase of 2.8%, rising only 0.4% in the fourth quarter. The previous quarter was at an increase of 0.7%, while the highest increase of the year came from the second quarter, with 1.1%. The annualized growth of the fourth quarter was only 1.7% in Canada, with the majority of the growth coming from domestic demand (with an increase of 1.1%), compared to the U.S.'s annualized growth of 3.8% in the final quarter. Corporate profits within Canada stayed the same as they were in the third quarter, at 1.5%, while exports and manufacturing profits declined. Inventories also rose by $19.2 billion in the final quarter, and businesses increased investments in machinery and equipment by 9.4% as corporate surpluses grew by 17.7%. However, Canadians continued to spend freely, causing the savings rate to decrease to its lowest since the 1930's.
Relation to Chapter 6
As reported by Statistics Canada, Canada's econonic growth has declined to a total growth of 2.8% in the year of 2004. This has been mainly due to the drastic increases in the Canadian dollar, which has caused all of manufacturing, exports, and corporate profits to suffer. Inventories rose by a fairly significant amount, but with the majority of the increase being accounted for by durable goods and wholesale trade and manufacturing. As investment by businesses increased, this would lead to an increase in aggregate demand, which in turn, would cause GDP to increase. Also, as consumers were continuing to spend and not save their income, the profits of financial institutions were harmed. The decrease of the savings rate could also partly be due to the low interest rates during the beginning half of the year, as with low interest rates, the opportunity cost of not saving would be less.
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