ECON 2000 Chapter Notes - Chapter 9: Nominal Rigidity, Monetary Policy, Money Supply
Document Summary
Canada"s gdp growth averages around 3. 1% per year over long run, but has large fluctuations in the short run. When there is falling output and rising unemployment, economy said to be in recession. Okun"s law the negative relationship between gdp and unemployment: as gdp falls, unemployment rises (and vice versa) Consumption and investment fluctuate with gdp, but consumption tends to be less volatile and investment more volatile than gdp. One of most important drivers of fluctuations in canadian economy is existence of volatility in the united states: we export significant fraction of output to americans, and when they stop buying. Canadian goods, many firms in canada need to cut production. Economists call these fluctuations in output and employment the business cycle. Economic environment affects gov"t i. e. , state of economy influences tax rev. Gov"t can affect economy through choices of monetary and fiscal policy economy forecasting therefore an input into policy planning.
