TAILIEUCHUNG - Lecture Basic microeconomics - Chapter 3: The Canadian economy in a global setting

After reading this chapter, you should be able to: Describe how businesses, households, and government interact in the economy; understand the importance of private business in the economy and understand the changes due to a digital economy; summarize the sources of income and role of households in the economy. | The Canadian Economy in a Global Setting Chapter 3 Laugher Curve Frank: According to this economist, Ernie, it’s all very simple. In an endogenous business cycle where variable-span diffusion indices are neither rising nor falling and the capital-to-output ratio is low, then the interplay of liquidity preferences and reserve ratios escalates and interest rates rise, causing the yield ratio to drop on common stocks. Laugher Curve Ernie: I get it! In other words, when the economy goes higgledy-piggledy, the TSE goes blooey! The Canadian Economy Ultimately the Canadian economy’s strength is its people and its other resources. The Canadian economy is far from perfect. Diagram of a Market Economy The Canadian economy, as most market economies, is divided into three groups: business, households, and government. Diagram of a Market Economy Households supply factors of production to business and are paid by business for doing so. The place where this takes place is called the factor market. Diagram of a Market Economy Business produces goods and services and sells them to households and government. The place where this takes place is called the goods market. Diagram of a Market Economy Government engages in the following activities: It buys goods and services from business and buys labour services from households. It provides services to both business and households. Diagram of a Market Economy Government engages in the following activities: It gives some of its tax revenues directly back to individuals (income redistribution). It oversees the interaction of business and households in the goods and factor markets. Diagram of a Market Economy, Fig. 3-1, p 56 Business Business is the name given to private producing units in our society. Businesses decide what to produce, how much to produce, and for whom to produce it. Entrepreneurship and Business Entrepreneurship is the ability to organize and get something done. It is an important part of business, and an important .

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