Question
Canadian GDP growth was 1.1% in 2015 and is expected to edge down slightly in 2016 due to the persistent low price of oil, which
Canadian GDP growth was 1.1% in 2015 and is expected to edge down slightly in 2016 due to the persistent low price of oil, which hurts investment in the oil sector. The loonie is expected to remain weak vis--vis the US dollar, but the growth of US GDP is expected to slow down in 2016 due to a weak energy sector, a strong dollar, and turmoil overseas.
a) Use the expenditure approach for calculating Canada's GDP to explain how a weaker loonie might affect the growth of the Canadian economy. Also, how is a slow-down in US economic growth expected to affect the GDP growth of Canada?
b) Why might Canada's recent GDP growth rates overstate the actual increase in the level of production taking place in Canada?
c) Explain the complications involved with attempting to compare the economic welfare in Canada and the US by using the GDP for each country.
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