http://www.cbc.ca/news/background/budget2008/issues-ei.html
Bracing for downturn?
For the past sixteen years, Canada has been having an uninterrupted job growth allowing $54 billion to be stored in the Employment Insurance account. The current Conservative government is preparing for the difficulties ahead caused by the recession in the United States by setting aside $2 billion to quickly help pay any surge in payouts caused by an economic downturn. Also, Ottawa is creating an independent Crown corporation called the Canada Employment Insurance Financing Board (CEIFB) to store future Employment Insurance account surpluses. This act is an attempt by the government to increase the predictability of setting EI premiums and benefits.
In chapter 8 we learn about automatic stabilizers which influence economic conditions. Employment insurance is one of them. The employment insurance takes out money from people’s paychecks and returns it to them in times of unemployment. Since Canada has been having a success in job growth, it is not surprising that Canada has accumulated $54 billion stored in the Employment Insurance account. This money is used as an economic stabilizer by giving money to the unemployed incase there is a sudden spike in job loss. This causes the GDP to decline less than if there were no aid at all.
I think that it is great to know that the Canadian government is prepared to help the country incase there is a downturn in the economy. With $54 billion stored away, any harm caused to the economy by a sudden spike in job reduction can become minimal or even negated. Now people do not have to worry as much about the events in the United States because if they lose their jobs, then they will receive Employment Insurance benefits to help cover them. In the end, it doesn’t affect me directly, but I can see how it will be a huge benefit to others.
Thursday, May 22, 2008
Sunday, May 4, 2008
Chapter 7 Blog
http://www.cbc.ca/money/story/2008/03/04/bankofcanada.html
Bank of Canada opts for aggressive interest rate cut
The Bank of Canada reduced their lending rate by half a percentage to 3.5% in order to prevent the weakening U.S. economy from greatly affecting Canada. Analysts have thought the rates would decrease from anywhere between 0.25% to 0.5%, and that the 0.25% would be more likely seeing as the domestic demand in the Canadian economy was still strong, but the central bank said Canada’s economy has shown signs of weakening within the last two months. Also, the bank said the recession in the U.S. residential housing market is damaging the other parts of the U.S. economy and as a result, increasing the risks in damaging Canada’s economy.
In chapter 7, we learn about the creation of currency and the function of the Bank of Canada. As seen in this news article, the Bank of Canada determines actions in order to minimize the effects of dramatic changes that have a chance of affecting Canada’s economy such as the recession that the United States are experiencing. By reducing the lending rate by half a percentage, it will increase the amount of money that people will have allowing them to keep the aggregate demand stable and therefore the aggregate supply within Canada will remain the same.
I think that the Bank of Canada has made a good decision in reducing the lending rates by half a percentage. Canada does almost all their international trading with the United States, which currently is in a recession, will greatly hinder the Canadian economy in the end. By reducing the rate, individuals will have to pay back less to banks for the money they borrow which will slightly increase the aggregate demand compared to before the drop. I would have to say anything that would help maintain demand is a good idea during these times of economic hardships. Although the decrease in rate will not completely stop the effects of the American slump, it will act as a slight buffer to reduce the damages done.
Bank of Canada opts for aggressive interest rate cut
The Bank of Canada reduced their lending rate by half a percentage to 3.5% in order to prevent the weakening U.S. economy from greatly affecting Canada. Analysts have thought the rates would decrease from anywhere between 0.25% to 0.5%, and that the 0.25% would be more likely seeing as the domestic demand in the Canadian economy was still strong, but the central bank said Canada’s economy has shown signs of weakening within the last two months. Also, the bank said the recession in the U.S. residential housing market is damaging the other parts of the U.S. economy and as a result, increasing the risks in damaging Canada’s economy.
In chapter 7, we learn about the creation of currency and the function of the Bank of Canada. As seen in this news article, the Bank of Canada determines actions in order to minimize the effects of dramatic changes that have a chance of affecting Canada’s economy such as the recession that the United States are experiencing. By reducing the lending rate by half a percentage, it will increase the amount of money that people will have allowing them to keep the aggregate demand stable and therefore the aggregate supply within Canada will remain the same.
I think that the Bank of Canada has made a good decision in reducing the lending rates by half a percentage. Canada does almost all their international trading with the United States, which currently is in a recession, will greatly hinder the Canadian economy in the end. By reducing the rate, individuals will have to pay back less to banks for the money they borrow which will slightly increase the aggregate demand compared to before the drop. I would have to say anything that would help maintain demand is a good idea during these times of economic hardships. Although the decrease in rate will not completely stop the effects of the American slump, it will act as a slight buffer to reduce the damages done.
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