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Canada (158,391)
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MGM101H5 (354)
Chapter 5

MGM101 Chapter 5 and 6 summaries (Midterm #2)

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University of Toronto Mississauga
Dave Swanston

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 elsewhere. 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 business. 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 fundamental factors: 1. Expenditures 2. Savings 3. Capital asset investments 4. Credit 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 are: -goods and services produced and purchased domestically for consumption -business investments within the economy -goods produced for export purposes -government spending 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 time. Goods and services that will be demanded by Canadians as a whole. • inflation •geographic clustering •currency exchange rate impact •branch market impact •sustainability and green initiatives •aging workforce, immigration and multi-culturalism •long-term competitiveness • small business emphasis • globalization 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
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