Macro Assignment.docx

1. a) i) The economic and financial data of Canada ii) Real Sector, Fiscal Sector, Financial Sector, External Sector, Population. iii) The major variable of the Real Sector Markets of Good and Services: Q: GDP P: Composite Price Level Employment Level Q:employment P:Wage Level Financial Sector Q: Money P: Interest levels External Sector Q: Imports and Exports P: Foreign exchange sector iv) The Fiscal Sector consists of the government’s debts, revenues and its net lendings b) i) This is Canada’s GDP from 2007-2011 in terms of expenditure. ii) Final Consumption Expenditure, Gross fixed capital formation, Investment in Inventories, Exports of goods and services, Imports of goods and services and Statistical discrepancy. iii) 1,368,864 + 414,369+ 1,323+ 539,286 +561,398 + 12= 1,762,432 c) i) Measures the GDP using income approach ii) Compensation of employees, Gross operating surplus, Gross mixed income, Taxes less subsidies on production, Taxes less subsidies on products and imports and Statistical discrepancy. iii) 879,225+ 501,772+ 202,256 + 75,551 +103,616 +12= 1,762,432 iv) 2011 Labour’s share of national profit= Compensation of employees- $879,225 ($879,225/1,762,432) * 100 = 49.89% of GDP is labour’s share of national profits 2011 Share for corporate profits: (266,642/1,762,432) *100= 15.1 % of the GDP is the share for corporate profits. 2. The bank of Canada is interested at look at core inflation because the price of certain CPI components are too volatile, thus seeing only the “core” gives a better look at the underlying trend of inflation. Core inflation can help the Bank of Canada achieve the CPI inflation target. Core inflation is measured by removing the most volatile goods and services from the CPI’s main basket, for example those are affected by world commodity prices. 3. a) sample of series 1992-01 83.1 1992-02 83.2 1992-03 83.6 1992-04 83.7 1992-05 83.9 1992-06 84.1 1992-07 84.1 1992-08 84.2 1992-09 84.3 1992-10 84.4 1992-11 84.5 1992-12 84.7 1993-01 84.9 1993-02 85.2 1993-03 85.2 1993-04 85.3 1993-05 85.4 1993-06 85.4 1993-07 85.5 1993-08 85.7 b) i) Inflation rate between December 2008-December 2009: (115.4/113.9-1) x 100= 1.3% inflation ii) Inflation rate between December of 2012 and December of 1992: (121.9/84.7-1) x 100= 44% inflation iii) IR= (CPI Oct 2012/ CPI Oct 2002-1) *100 (122.2/101.3 -1) *100= 20.6 % c) Yearly Inflation Rate (1972-2012) 14 12 10 8 6 4 Inflation Rate 2 0 1972197197619719801982198198619819901992199199619920002002004200620020102012 Year The inflation rate was the highest in 1981 with 12.5% inflation rate and was the lowest in 1994 with an inflation rate of 0.1%. Since 1992 the inflation rate in Canada has been relatively low not going higher than 3% inflation. Since 1972 the inflation has been steadily been decreasing, with the exception of a couple of spikes (1975-1976 and 1981-1982) d) i) The average inflation between 1972-2012 in Canada was 2.1% ii) ((121.7/78.4)^1/22 -1) x 100=2.02% e) i) The extrapolated CPI of 2012 is 229.3 78.4 (1+0.05)^22= 229.3 ii) The value of the CPI in 2012 with deflation would be 62.8 78.4 (1-0.1)^22=62.8 f) ii) Real GDP (1980-2012) 1.6E+12 1.4E+12 1.2E+12 1E+12 Real GDP 8E+11 6E+11 Amount of money 4E+11 2E+11 0 1980198198198619819901991991996199200020020020062002010 Year Stage of the business cyle: 4 Stage of the business cyle Contraction or Recession- When the economy starts slowing down, usually two full periods of negative growth. Trough - When the economy hits bottom, usually in a recession. Expansion - When the economy starts growing again. Peak - When the economy is at its