Other things equal, serious recession in the economies of Canada's trading partners will:
A)have no perceptible impact on the Canadian economy.
B)cause inflation in the Canadian economy.
C)depress real output and employment in the Canadian economy.
D)stimulate real output and employment in the Canadian economy.

Question

Quizplus · Accepted Answer

A serious recession in Canada's trading partners would lead to a decrease in demand for Canadian exports, which would reduce Canadian real output and employment. This is because Canada's economy is highly dependent on its exports, making up 31% of its GDP. Therefore, the decrease in demand for its exports would have a significant impact on its economy. Moreover, the decrease in demand for exports will lower the demand for the Canadian dollar, leading to a depreciation of the currency. This would increase the prices of imports, leading to inflation, which is not the case stated in option B. Option A is incorrect because the economy's trading partners contribute largely to Canada's economy, thereby having consequences on the Canadian economy. Finally, option D is incorrect because a decrease in demand for exports would not stimulate the real output and employment in the Canadian economy.

Other Things Equal, Serious Recession in the Economies of Canada's