Chapter 7

http://www.bank-banque-canada.ca/en/mpr/pdf/2010/mprsumjan10.pdf

Summary:

This article talks about Canada’s economic recovery. The Canadian economy is expected to return to full capacity by the third quarter of 2011. The report states that Canada’s economy is projected to grow by 2.9% in 2010 and 3.5% in 2011, after it contracted by around 2.5% in 2009. There have been speculations that the recovery might be so strong that, the inflation rate will continue to rise. The bank has also stated that they will maintain the overnight rate of .25% until the end of the second quarter of 2010 in order to achieve the inflation target.

Connection:

The connection between this article and chapter 7 is the monetary policy. This policy is about the actions the Bank of Canada taken to alter the money supply. In this case, the Bank of Canada maintains its 2.4% overnight rate to help the economy’s recovery. The inflation rate is affected by the overnight rate too. By having a steady 2.4% overnight rate, the Bank of Canada wants to prevent the inflation from growing too strong. The inflation rate is projected to grow at 2.9%, which is greater than what we had before. On top of that, it is speculated that the inflation rate will continue to rise in 2011, to 3.5%. This is why the Bank of Canada kept it’s overnight rate at 2.4%.

Reflection:

I think that the economy’s recovery not just be a recovery, but also grow stronger then it was. The inflation rate may continue to grow each and every year. I don’t know if this is a good thing or a bad thing. On one hand, the inflation will cause a decrease in demand, however, after the Olympics we need to pay off the debt. The inflation will help Vancouver pay off some of the debt. Nonetheless, the economy’s recovery is a good sign for most countries, especially the ones who are investing in Canada.