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The Economy: Myth and Reality 2009, Nelson Education Ltd.;

When you cannot measure, your knowledge is meager and unsatisfactory.
- A maxim attributed to LORD KELVIN

Contents
The Canadian Economy: A Thumbnail Sketch The Inputs: labour and Capital The Outputs: What Does Canada Produce? The Central Role of Business Firms Whats Missing from the Picture? Government Conclusion

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The Canadian Economy: A Thumbnail Sketch

A Mixed Economy
Close to one quarter of total production flows from public sector activities. Gross Domestic Product (GDP): standard measure of the economys output Government spending accounts for about 22 percent of GDP

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The Canadian Economy: A Thumbnail Sketch

A Relatively Open Economy

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The Canadian Economy: A Thumbnail Sketch

A Growing Economy
Real GDP in 2006 was about 5 times larger than in 1959 Real GDP per capita in 2006 was about 3 times higher than in 1959

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FIGURE

3: Real GDP Since 1959

as a share of GDP (%) Billions of Dollars per Year Average of Exports and Imports,
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The Canadian Economy: A Thumbnail Sketch

But with Bumps along the Growth Path
Growth is irregular from year to year
Periods of boom and bust (recession) known as business cycles or economic fluctuations. Unemployment rises during recessions and declines during booms.

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4: Growth rate in GDP in Canada Since 1927

FIGURE

Who are Unemployed Percentage of Civilian Workers

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5: Unemployment Rate in Canada 1921-2006

FIGURE

Who are Unemployed Percentage of Civilian Workers

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The Inputs: labour and Capital

The Canadian Workforce: Who is in it?
16.5 million Canadians held jobs in 2006
Increased participation of women since 1950 In 1950, 23% of women in the labour force In 2006, over 62% of women in the labour force

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The Inputs: labour and Capital

The Canadian Workforce: What does it do?
Majority of workers produce services, not goods
Similar to other industrialized countries labour-saving innovations in manufacturing has reduced the share of workers in goods-producing industries

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FIGURE

10: The Growing Share of

Service Sector Jobs, 1967 versus 2005

of the Total labour Force Service Sector Jobs as a Percent

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The Inputs: labour and Capital

The Canadian Workforce: What it earns?
Wages account for 60 percent of income
Average hourly wage of over $20 plus benefits Typical weekly pay check of approx. $700 Similar to wages in industrialized countries

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The Inputs: labour and Capital

Capital and Earnings
Capital: machines and buildings Payments to capital account for the remainder of national income
Owners of capital receive profit and interest Profit accounts for about 7 percent of the price of a typical product

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The Outputs: What does Canada Produce?

Consumption versus nonconsumption uses
Consumption: consumer spending on goods and services
Accounts for 60 percent of GDP

Nonconsumption uses include government services, business purchases, and consumer purchases of new homes

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The Central Role of Business Firms

Private business
Turn inputs into output
2.5 million business firms (one for every 13 people) 7,000 businesses fail each year

Nationality of a business
Difficult to determine
Multinational corporations - Businesses that operate factories in several different countries, sell output globally, and have stockholders in many different countries

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Whats Missing from the Picture? Government

The Government as a Referee
Enforce laws and act as an arbitrator

The Government as Business Regulator

Government activity designed to improve market activity
Anti-combines legislation Environmental regulation
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Whats Missing from the Picture? Government

Government Expenditures
Government spending on
Pensions and income security programs Health-care expenditures National defense Interest on national debt Other- education, transportation and communication, housing, environment, foreign aid
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14: Allocation of Government Expenditures, 2007

FIGURE

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Whats Missing from the Picture? Government

Taxes in Canada
By international standards, Canadians are not overly taxed.

The Government as a Redistributor

Socialist idea equal distribution of income overrides the decision of the market. Many economists use progressive taxes and transfer payments to reduce income inequality.
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16:The Tax Burden in Selected Countries, 2006

FIGURE

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Conclusion: Its a Mixed Economy

Mixed economy
Canadian economy blends private and public ownership, with some government influence over the workings of free markets

What does the market do well, and what does it do poorly?

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