CANADIAN ECONOMY

Contribution of Canadian Government and Bank of Canada in Canadian Economy

Contribution of Canadian Government and Bank of Canada in Canadian Economy

Introduction

Canada is among the world's eleventh economy, associate with Organization for Economic Cooperation and Development (OECD) and Group of Eight (G8). It is known as one of the wealthiest economies of world. Canada is specialized in service industry which covers three quarters of people. The most significant sectors are oil and logging industries in main sector. The manufacturing sector includes aircraft and automobile industry which are also important for Canada's economy (Lipsey and Alice, 2006).

Canadian government has been taking major parts in expanding industrial sector and control fiscal consolidation. On the other hand, Bank of Canada had been working as the Central Bank of the country and plays major role in controlling economic crisis such as inflation and recession through proper implication of monetary policy.

Contribution of Canadian government and Bank of Canada

The economy as a whole is the group of individual consumers and sectors interconnected with each other every day decide what goods and services are to be manufactured, which sector would provide particular products, the type of consumers as buyers, and the prices to be paid for the sale of the products. Government plays an important role at all aspects of market economies like US and Canada. They increase revenues by implying taxes on various economic activities and use these funds by offering services like education, health care, public house and defence. In case if government is not openly spending or taxing, they used their regulation as their representatives to implement policies like foreign ownership, product safety, quotas for milk manufacturing and television stations' license. Macroeconomics mainly focused on the performance of economic indicators like inflation, total output, unemployment, economic growth and monetary policy. Macroeconomic policy is divided into two major parts: monetary and fiscal policy. Fiscal policy is the collection of decisions government takes related to public spending, borrowing and taxation. The policy is implemented through all the level of provincial, federal and municipal as they are able to increase revenues through taxation and spending of resources on goods and services. There is an extent to each fiscal policy particularly at federal level as spending and taxation involved different regions and recipients which can be handled by federal government (Bank of Canada, 2012).

Monetary Policy

Monetary policy is the mean by which central Bank (Bank of Canada) and government supply funds to the public and thus, involving the accessibility and cost of money and imply interest rate related to it. The purpose of this activity is to achieve the target that leads to growth of economy and also to keep enough funds and reserves needed in financial crisis. It refers to the inflow and outflow of money. Inflow comes from taxes and outflow earned from government spending. This is the reason that it is also known as expansionary or contractionary policy. When the supply of money in the economy increases, expansionary policy takes place and when it ...