MGTA01H3 Lecture Notes - Lecture 9: Loonie, Canadian Dollar, French Wine

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25 Nov 2013
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Monday Nov 11, 2013- Lecture 9
On Exam: A LOT on Balance of Trade
Costs & Benefits of Trade
On one hand: We want foreign stuff!
On other hand: We want Canadian jobs!
Balance
of = Exports Imports
Trade
Balance of Trade
Historically:
Canada’s Balance of Trade positive
i.e.: we exported more than we imported
In 2008, that changed… why?-> because of recession, and they are our biggest
buyers
Canada was kicked in the manufacturing setting
Oshawa, Oakville: you’d know that we make a lot of car parts
Foreign Exchange Affects Trade
Strong CDN$:
We can buy more from US
Weak US$
They can buy less from Canada
As the Loonie goes up,
Trade balance goes down
Too much of our exports just go to one customer.
The US represents virtually 3 quarters of all of our exports. We are very heavily
dependent upon just one customer. US economy has been weak for the last 5 years,
so that’s not good for the Canadian economy.
The reason we are an open economy, is because we think it’s the best to get the best
stuff from people all over the world. We like the idea of getting German sportscars,
Italian suits, Japanese electronics. The problem is, they get all our money and they
get the jobs. From a business (employer) point of view, it’s far better that we
EXPORT. If we can sell Canadian oil, we get the money, profits, and jobs.
Value of US $ to Cdn $
When Jean Chretian was the Premier, the Canadian dollar was very weak. It was
worth about 65c US. Our Federal deficit was spiraling out of control. Our
government was living hugely beyond its means. Governments were asking all over
the world ‘what’s wrong with the Canadian government?’ We had a huge national
accumulated debt. Jean Chrétien and Mr. Martin were the guys who took on
Canada’s annual deficit problem. They slashed government spending and lots of jobs
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