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Canada (158,052)
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MGM101H5 (354)
Chapter 5

Chapter 5 Notes: The Canadian Economic Environment Canada and Its Economic System.docx

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University of Toronto Mississauga
Nate Charlow

Chapter 5 Notes: The Canadian Economic Environment Canada and Its Economic System • G7/8: quasi organization comprising the world’s major fully developed economies o G7 – Usa, japan, Germany, great britian, france, Italy, Canada Contributing Factors to Economic Development • Political stability, established factors of production, manageable levels of national debt, national monetary policy and banking system, low inflation, effective legal system, absence of corruption, comparative advantage, sufficient levels of investment • Comparative advantage : ability of a country to produce or supply goods or services at lower cost than other countries or to possess resources or unique services that are unavailable elsewhere • Foreign direct investment: occurs when a company of individual from one country makes an investment into a business within another country. This investment can be reflect physical ownership of a productive assets or purchase of significant interest in operations of business • Acore requirement to stability and growth of any economic system lies in its ability to service and promote both the current and future economic activity taking place • Underlying Economic Model o Law of supply and demand (refers to ability of market, independent of external influence, to determine price for which a product or service will be brought and sold) o Allowance of private ownership, entrepreneurship and wealth creation o Extent of gov involvement in influencing economic activity and direction • Demand reflect the number of purchases who are willing to pay for a product/services at various price points Allowance for private ownership, entrepreneurship, and wealth creation • Principle refers to openness of markets to support, encourage, and promote the concepts of private enterprise, personal ownership, entrepreneurship, and wealth creation Gov involvement in influencing economic activity and direction • Open systems : refers to an economic system that adheres to principles of economic freedom : law of supply and demand, full and open access to the principle or private ownership, entreprenurship, and wealth creation, and absence of regulation on part of gov • Controlled System: refers to an economic system where fundamentals of law of supply and demand, private ownership, entrepreneurship, and wealth creation are largely restricted fully controls the economic direction and activity • Mixed Economic System: economic system that contains components of both open and controlled systems. Includes core principles of economic freedom, with some degree of centralized economic planning and government regulation and involvement Canada: Mixed Economic System • Law and supply and demand • Government involvement • Canadian mixed economic system • Private ownership, entrepreneurship, and wealth creation Economy in Simple Terms • Expenditures : purchases you make in support of your day to day economic activity that are deemed to be of value in meeting sustenance needs and improving your overall quality of life • Savings : dollars you set aside today that will support economic activity and wealth creation in/for future • Capital asset investments: investments you are making today to further expand your capacity to conduct and expand your productivity and overall economic capacity • Credit: borrowing of dollars to support expenditures or investments being made. Economic Activity = Expenditures + Savings + Investment + Credit Economic Growth Cycle • GDP (gross domestic product) : refers to total market value of g/s (economic output) a nation produces domestically one calendar year o G/S produced and purchased domestically for consumption o Business investments within economy o Goods produced for export purposes o Gov spending • Recession: pe
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