TRADE AND CURRENT ACCOUNT BALANCES:
Refers simply to the fact that is on balance our imports vs exports if we are importing more than exporting. That means we are taking more CAD dollars and buying foreign currencies so we can buy imports. Since people are muying less of our stuff, they will be buying less of our dollar and if so, that is going to reduce our evaluation
China - exporting powerhouse - but it doesnt have a floating currency they keep currecny atifically low bc they have a fixed rate.
SIZE OF CANADAS PUBLIC DEBT
defecit: debt occurign in current year budget: 100 bil, rev: 80 billion and has a defecit of 20 bil
Debt:: all the dedecits incurred in previous uears. Over time a govt burrows money and their debt gets really big they have to collect taxes and they collect taxes they have to pay interest out of the current years budget otherwise default. THis is not productive since the taxes are going to pay interest.
SHORT TERM CAPITAL FLOW
The fact that people will move money in and out of countries depending on whats goign on with politics. They might put money in Canada. If canada was about to have a revolution people would take money out of Canada
Raising the interest rate drives down inflation. When interst rate is higher its more expensive to burrow money if interest rate is 10% and Im thinking about burrowing money I have to be careful; paying interest and make a profit
If interest rate is low like 1% people will borrow more money
Low interest rate drives consumer debt so when interest rates are low more people are likely to burow money to buy houses and consumer goods.
Low interest rate drive higher inflation and high interest rate drives down inflation
Banks want some inflation bc it makes burrowing cheap and encourages consumers to borrow money
If people buy CAD dollars,it increases the demand and rises the price, if you sell CAD dollar it reduces the value