Article: http://www.ottawabusinessjournal.com/318377005598058.php
Canada’s international trade surplus has increased by more than $2 billion in February. Due to the increase in exports and decrease in imports, the trade surplus has risen from $2.8 billion to $4.9 billion. The amount of exported goods grew 3.8% in categories such as automotive products, and energy products. The surplus was also driven by the decrease in imports of energy products. In addition, Canada’s export to United States has surged from $1.81 billion to $8.1 billion. This was the greatest surplus in more than a year. Also, Canada has decreased 3.4% in imports with the United States. This surplus was also gained because of decrease imports and increase in exports to countries including Japan, European Union, Netherlands, and Italy.
Relationship to Chapter 6- Multipliers, GDP
This article is related to chapter 6 because of the increase in GDP due to exports, foreign-trade multiplier. In this situation the GDP has rise because of the decrease in exports, since exports decreases the GDP. The export multiplier we have learned in class can help us identify that increase in exports is an increase in GDP. When the number of imports go down it means that more households are spending their money on domestic products, which is a good thing because it increase GDP. This way the money does not leak out of the circular flow of money. This is very important because in the expenditure multiplier we have learned that a spending of $1000 will not increase GDP by $1000, but instead it will increase by $5000 if the marginal propensity to spend is at 0.5.
We can assume that the economy of Canada is doing quite well, since there is an increase in exports and decrease in imports. People are spending more money in wages, rent, and interest on Canadian households when there is a decrease in imports. When Canada exports more goods it creates more job opportunities for everyone. As a result, it will cause an increase in GDP. If imports were to be increase, it would definitely not be good for Canada because that it means less goods and services are being produced and less people are able to get a job. Although this is foreign trade multiplier, the other multipliers can also be taken into consideration. For example, when the economy is doing well the government would probably want to increase tax and decrease spending. In order to find the GDP of this action, we would have to use balanced-budget multiplier to find out the net value of the GDP.
1 comment:
I agree that Canada is doing very well. An increase in exports from $1.81 billion to $8.1 billion is a huge increase. That is about 350% of extra exports. Our GDP will go up greatly by the expenditure multiplier and with a high GDP; we can clearly see that Canada’s economy is very successful. With less imports, it also helps increase GDP, but it also allows Canadians to be less dependent on other countries. If there is ever a stop in trades due to war or broken transportation routes we should be able to survive as a country on our own. I think that Canada isn’t able to survive on its own yet and needs American support, but we are getting closer to becoming a stronger country.
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