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Chapter 5

Chapter 5 readings notes

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Lecture 5: The Vital Importance of Achieving Productivity Growth for a Market Economy
5.1: Partnering for Prosperity in Canada
our economy must grow so the standard of living continues to rise
one of the most prosperous countries in the world
to grow, we have to be competitive with other jurisdictions: our imp. Trading partners
competitiveness depends on our capability to produce and sell superior products and services
customers in Canada and in other parts of the world have to be eager to buy
or we can sell out products/services at good prices (they are produced at lower costs with
superior processes)
increased intl. trade + globalization allows firms and regions to expand potential markets
also focus on specific products/services and capabilities
have to be internationally competitive in their specialization
canadas international competitiveness has prospetiy gap with US (most significant trading
significant prosperity gap is widening/large, continued to widen slowly + steadily past 2
to prevent this, Canadian p eo ple, bu sines s es + g ovts h ave to work to g ether to g enerate hig
prosperity for o ur c a pit al, h u man an d n atural reso urc e s
c a nadas e c onomy p erformed well, a c hieved ab ov e average g rowth in e c o n o mic o u tp u t, eli m
g ovt d eficit, etc
on e of the b est plac e s in the world to live, work, invest
resp o n d ed well to challen g es of glob alization
Canada le a ds worlds top p erforming e c onomies in ex p orts
US ap propriate b enchmark for c a nadas e c o n o mic pro gres s
19 9 8 g ap: $6800 2002
Prosperity g ap NOT from fund amental we a k n es s es like d emo g rap hics or workforc e
chara c teristics
Indic a tes Canadians no t d eriving as much stren g th from avail able reso urc e s as we could
By not realizing full economic potential we will not be able to increase economys capacity f
future upgrades and innovations to support higher spending in education/health
If gap eliminated, economic well being of Canadians would be enhanced
Mortgage payments covered, rent payments offset, etc, buying a car easier
Provincial + federal govts benefit
Additional tax revenues would allow govt to address issues like health care, education, etc
Economic progress tied to US
Have to strive to perform as well or bet ter economically than US
Narrowing prosperity gap requires public policy and private strategies initiatives
Improve productivity to close gap
Under investment: economic problem
Partnering for investment will help close the gap
GDP per capita best measure of how economy is performing over time against peers
Measures value added: value created in conversions of countrys natural, labour and capital
resources into products and services consumers buy here and around the world
GDP captures costs of inputs and value outputs
Increases with bet ter/more innovative products and services com manding higher prices
Increases with generating increasing demand for high prices products by using inputs more
GDP allows us to benchmark progress against other countries