MGM101 Chapter 5 – Canadian economic environment
Productivity gains, strong business investment, technological innovation, moderate wage
increases, and a favourable currency exchange rate are all key factors that are deemed to be
critical in ensuring that our economy remains resilient and competitive now and in the future.
Comparative Advantage refers to the ability of a country to produce or supply goods or services
at a lower cost than other countries or to possess resources or unique services that are unavailable
Foreign Direct Investment (FDI) occurs when a company or individual from one country makes
an investment into a business within another country. This investment can reflect the physical
ownership of productive assets or the purchase of a significant interest in the operations of a
Three fundamental market composition principles:
1. The law of supply and demand
2. Allowance for private ownership, entrepreneurship, and wealth creation
3. Extent of government involvement in influencing economic activity and direction
Law of Supply and Demand refers to the ability of the market, independent of external
influences, to determine the price for which a product or service will be bought and sold.
Open System refers to an economic system that adheres to the principles of economic freedom:
the law of supply and demand, full and open access to the principles of private ownership,
entrepreneurship, and wealth creation, and an absence of regulation on the part of government.
Controlled System refers to an economic system where the fundamentals of the law of supply
and demand, private ownership, entrepreneurship, and wealth creation are largely restricted or
absent, and the government fully controls the economic direction and activity.
Mixed Economic System refers to an economic system that contains components of both open
and controlled systems. It includes the core principles of economic freedom, with some degree of
centralized economic planning and government regulation and involvement.
Productivity and its resulting economic activity will be predicated on the basis of four
3. Capital asset investments
GPD refers to the total market value of the goods and services (economic output) a nation
produces domes- tically over a period of time (generally one calendar year).
Examples of factors that contribute to economic growth and, therefore, the total value of GDP
-goods and services produced and purchased domestically for consumption -business investments within the economy
-goods produced for export purposes
Recession is a period of time that marks a contraction in the overall economic activity within an
economy. A recession is typically believed to occur when an economy experiences two or more
quarters of negative GDP movement.
Chartered Banks are financial institutions regulated under the Canada Bank Act. Their primary
responsibility is to bring together borrowers and lenders by accepting deposits and lending out
money—all in a manner that safeguards the interests of their customers.
Inflation is a rise in the level of prices of goods and services within an economy over a period of
Goods and services that will be demanded by Canadians as a whole.
•currency exchange rate impact
•branch market impact •sustainability and green initiatives
•aging workforce, immigration and multi-culturalism
•long-term competitiveness • small business emphasis
Parity means being equal or equivalent to; specifically, the value of one currency being equal to
that of another.
PPP (Purchasing Power Parity) a measure that