Mbaf504 Economics Form A Business Assessment Answer


Answers:

Components enhancing the real GDP of Canada:

2017 was one of the best years for the economy of Canada, when the economy has grew by 3% annual growth rate which is the fastest rate of growth during the last 6 years depicting the good performance of the Canadian economy (Abedi, 2018). Compared to this, during the years 2011 to 2016 it can be seen that the economic growth of Canada was approximately 1.4% portraying the poor performance of the same (Vargara, 2018). As the component of the GDP growth figures during 2017, international trade can be considered as the main source and along with the same there has been higher rise in the Canadian consumer spending allowing the aggregate demand of the economy to rise. As it can be seen from the household spending of 2016, Canadian economy has grew by 4.6% and the savings rate was also higher allowing the private investment to rise (Cbc.ca., 2018). Moreover, Canada being a resource rich nation have faced good amount of business in the international market under the rising competition between the America and China that has allowed the domestic producers face higher demand of their good and services in the international market. Thirdly, rise in the crude oil price during the recent years has enabled the oil refineries of Canada to register higher profit that has enhanced the performance of the domestic economy.

Role of international trade in case of Canadian GDP growth:

International trade is one of the main source of growth generations that has enhanced the performance of the state during the recent years. As per the latest report, export growth of Canada during 20017 was as high as 9.6% compared to the previous year and the import growth was 7.4% depicting the highly developing trade situation of the domestic economy (Abedi, 2018). As per the Joseph Schumpeter’s idea of Creative Destruction since 2015, Canadian firms has replaced their old framework of operation and since then it has faced good amount of growth in their operational performance. As it can be seen from the figure below, since 2000, there has been strong upward growth in the international trade proposition of the Canadian economy, however, during 2010, there has been huge fall in the export as well as the import of the Canadian economy allowing the trade balance to deteriorate and the GDP of the domestic economy to fall as well (Leonard, 2018).

Figure 1: Export situation of Canada

Source: (Globalnews.ca., 2018)

Post this, with rise in the growth in production through effective monetary policy from the government, interest rate was raised and the domestic economy started to get flooded with the foreign investment that enhance the export proposition of the domestic economy, where it create more than 2,942,400 jobs in the domestic economy during 2011 and post that with 16.7% growth rate in employment, international trade eventually reduced the unemployment rate of the domestic economy (Yang et al., 2018).

Figure 2: Export situation of export and import in Canada

Source: (Globalnews.ca., 2018)

Under the NAFTA rule, Canadian traders get better exposure in different market ranging from the western markets to the Asian market that has allowed the direct trading between the Canadian traders and traders from the China, USA and EU nations (Cbc.ca., 2017). In addition to this, sloth in the trading proposition of the USA and China due to the trade war between them, Canadian exporters has faced good growth in their business prospect (Vergara-Alert, 2018). As it can be seen from the figure below, strong manufacturing industry performance along with energy and non-energy based industry performance, trading proposition of the Canadian economy has faced good amount of growth (Yang et al., 2018).

Impact of NAFTA termination on the Canadian economy:

Termination of NAFTA will provide different impact on different province of Canada. States, whose economy largely dependable upon the international trade, their economy will face higher amount of loss in revenue. On the other hand states who have faced sanctions due to the implication of NAFTA, will face good amount of boost in their economic performance (Globalnews.ca., 2018). Main export of the Canada is frozen vegetables, minerals, aluminum with US and it will get impacted by a large extent allowing the domestic economy fall in their growth if NAFTA is withdrawn.

Province of Canada that will be most affected due to termination:

If the NAFTA is terminated, then the New Brunswick will be affected mostly due to the fact that their economy is largely dependable upon the international trade and as per the statistical figures 28.5% of the domestic economy is generated through the trading with US (Bankofcanada.ca., 2018) Thus, if the NAFTA is terminated, then it will reduce the performance of the domestic economy by a large extent.

References:

Abedi, M. (2018). These provinces will be most (and least) hurt if NAFTA is terminated: report. Global News. Retrieved 14 August 2018, from https://globalnews.ca/news/4087122/nafta-termination-canada-provinces-effect-moodys/

Bankofcanada.ca. (2018). How Canada’s International Trade is changing with the Times. Retrieved 14 August 2018, from https://www.bankofcanada.ca/wp-content/uploads/2017/09/remarks-180917.pdf#chart2

Cbc.ca. (2017). Canada tops G7 in latest IMF estimate for 2017 economic growth, No. 2 in 2018 | CBC News. Retrieved 14 August 2018, from https://www.cbc.ca/news/business/imf-canada-economy-g7-1.4347737

Globalnews.ca. (2018). Canadian economy grows at 3 per cent in 2017, fastest pace in 6 years. Retrieved 14 August 2018, from https://globalnews.ca/news/4058301/canada-q4-2017-gdp-growth/

Leonard, G. (2018). Financial and Qualitative Determinants of Voluntary Environmental/sustainability Reporting in the Canadian Mining Sector. International Journal of Business Administration and Management Research, 4(2), 7-12.

Vergara-Alert, C. (2018). The effects of interest rates on the valuation of highway infrastructure assets. Transportation Management.

Yang, X., Zhang, Z., Cuthbert, L., & Wang, Y. (2018, June). Forecasting Macao GDP Using Different Artificial Neural Networks. In International Conference on Information Science and Applications (pp. 431-442). Springer, Singapore.


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