http://www.cbc.ca/money/story/2010/04/23/inflation-rate.html
Summary:
A recent article talks about the issue of inflation in Canada. The annual inflation of consumer prices increased by 1.4% from March/09 to March/10. There is a small decline of inflation from February, which was 1.6%. Also, gasoline prices have continued to increase for the fifth straight month, increasing 17.2% this March from the previous year. On average, energy prices increased 5.8%. In general, prices of food, cars, and communication devices increased, but on the other hand, mortgage interests, energy, and clothing decreased. Canada’s economy has been growing faster than economists predicted, leading to an The Bank of Canada's decision to increase interest rates to control the inflation.
Connection:
The connection of the article to our text is inflation and the monetary policy. The Bank of Canada increases the interest rates to control inflation. Stabilizing the economy through the use of adjusting interest rates is an example of the monetary policy. The Bank of Canada’s decision to increase interest rates, as part of the monetary policy, shows that inflation is becoming an issue and needs to be controlled. Interest rates also mean the “cost of money”, so when interests rates are high, the “price of money” is also higher. The law of supply and demand also works in this case. The increase in “price” will result in a decrease in demand. When demand goes down, inflation will also go down.
Reflection:
From this inflation that we are seeing, Canada’s economy is doing fine and we are definitely not still wrapped up in the recession. I find the issue of unemployment and inflation very interesting because they are both equally bad economic issues and the government will solve the issue that is occurring right now. It is a cycle. When we are in a good economic time, the government will use the stabilization policy to control the inflation. In this case, we are in a time of inflation, and the government is increasing interest rates as part of the monetary policy.
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ReplyDeleteI agree that Canada's economy has begun a steady recovery. However, I believe that the Bank of Canada has to be careful about raising interest rates. Canada has just come out of the recession and the economy may still be very fragile. I think the Bank of Canada should at least wait a couple more quarters before they raise interest rates. The Stabilization Policy is important, but they must be cautious in using it. I also find it intriguing that prices for energy is increasing, but the price for food and cars are decreasing.
ReplyDeleteHey Wilson,
ReplyDeleteI am so happy with the news the Bank of Canada increase the interest rate. That represents the economy of Canada is getting better everyday. I think we are leaving the worst economy recession period. During the recession period, inflation is the worst ever to the country. When we just have enough to live, we are told that all the prices go up. This is the worst news ever. But the Bank of Canada is doing a good job of controlling the inflation. How could you always find some great articles like this?