Chapter 3 Article

http://www.reuters.com/article/idUSN2014037620100120?type=usDollarRpt

Summary:

This article is about how the Bank of Canada uses the monetary policy to keep their interest rates low. The monetary policy is the adjustment of interest rates. By keeping their interest rates low, it allows banks to lend out money to businesses more freely and easily, but it will affect the money supply. Banks lending out money will help the economy move along. They also talk about inflation rates and how it is being used with the interest rates. Inflation is the increase in the general level of prices. Keeping the interest low will also have a negative impact on the economy. Since lending out money is easier, then money supply would lower. If the government decides to print more money for funding then it would result in a decrease in the Canadian dollars. With interest rates being low and money being lent freely, this has caused a housing bubble in Canada. The government is worried that the housing bubble would be out of control and cause major financial problems just like it did in the United States a few years ago.

Connections:

The article is a perfect example of how the government is involved in helping out the Canadian economy. The government is trying to adjust the interest rates and control inflation so that the economy would recover. They are also trying to promote people to spend more which will make cash flow easier. At the same time of adjusting and controlling, the government has to make sure that the money supply would not decrease by a lot.

Reflection:

I think the Bank of Canada is doing the right job by making the interest rates low and trying to control inflation at the same time. If they didn’t do that then we would be like the United States and have an even worse economy. The Canadian dollar is being maintained so that it is not decreasing as much as the American dollars right now. As long as the Canadian government keeps doing the same thing then the house prices would increase meaning people are spending more so we can get a better cash flow.