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Chapter 6-7: What I Learned + Link to relevant article

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Chapter 6-7: What I Learned + Link to relevant article

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I learned about the different approaches for calculating GDP. I already knew about total expenditure and total output approaches, but I didn’t know about the circular flow model, which involves households, firms, government, and financial markets. The GDP deflator was an interesting topic, because it reflects price changes between years and can be used to calculate inflation as well. I also learned about the CPI again, the price changes of the average Canadian’s basket of goods and how it is publicly available and calculated monthly, which is useful. I learned that zero inflation is not good, because it prevents workers from asking for wage increases despite their increased productivity. I learned that wage is tied to inflation, which I haven’t thought of previously.

Statistics Canada CPI for August 2025

https://www150.statcan.gc.ca/n1/daily-quotidien/250916/dq250916a-eng.htm?indid=3665-1&indgeo=0

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Chapter 3: What I Learned + Link to relevant article 

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Chapter 3: What I Learned + Link to relevant article 

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I refreshed my memory about supply and demand in chapter 3. I learned about the relationship between the price of a good and the quantity demanded/supplied. For supply, it’s a positive relationship, and for demand, it’s a negative one. I also learned that changes along the demand curve are possible only though price changes. I learned about the various factors that cause shifts in the demand curve and the supply curve. Government policies, such as higher taxes, cause the supply curve to shift to the left, indicating a decrease, which I didn’t really think of until now.

Supply and demand in the food market article linked.

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An annual report on food prices in Canada is predicting more pressure on grocery costs in the coming year - but it also notes that some prices in 2024 were lower than predicted.

The Food Price Report, released Thursday, is forecasting that Canadians will see the biggest price jumps next year in meat and vegetables, along with a jump in the cost to eat at restaurants.

Food prices overall are estimated to increase by three to five per cent compared to 2024 - higher than the Bank of Canada's inflation target of between one and three per cent.

That means a family of four would pay about $800 more for food in 2025 - roughly $66 extra a month - if food inflation hits the highest point the academics predict.

The annual report is published by a group of universities, including Halifax's Dalhousie University, the University of Guelph, the University of British Columbia and the University of Saskatchewan.

"We are expecting a difficult year, unfortunately, for families," said Sylvain Charlebois, lead researcher on the project and a professor at Dalhousie University.

This year, researchers on the project also used several artificial intelligence models to help estimate changes in food prices, though the authors wrote that they had human experts weigh in on the AI results as well.

A slower climb in 2024

The Food Price Report noted that the cost of food for 2024 came in on the lower end of its estimates for that year.

Though costs had been predicted to increase by 2.5 to 4.5 per cent, food inflation rose by 2.8 per cent - meaning an increase of $436 for a family of four through the year - bringing total food spending for that family to $16,032. Had the higher end of those predictions come to pass, they would have spent $264 on top of that.

Charlebois told CBC News that 2024 may have seen a bit of a slowdown when it comes to food inflation, but he believes 2025 could see things track back upward.

"A lot of people didn't feel it, but 2024 was actually a bit of a break year, compared to the last few years ... in Germany, the food inflation rate is starting to rise again at the same level as Canada. So we're not alone in this," said Charlebois in an interview, speaking from Berlin.

Meat, vegetables, fruit could cost more in 2025

This year, meat, vegetables and restaurant prices are likely to increase faster than other products, Charlebois said.

"Those are the three categories that are likely gonna push food inflation higher next year," he said.

The Food Price Report is predicting that meat will top its list of food inflation, going up by between four and six per cent. This matches reports from beef industry experts, who have said their product has been hitting record prices.

WATCH | A family of 4 could pay up to $800 more for groceries in 2025:

In September, beef striploin cuts were going for $32 per kilogram, compared to just $20 in December 2023. That issue is exacerbated by a drop in cattle, with numbers falling to their lowest since 1987, while reports indicate consumer demand remains strong for many beef products.

Restaurants and vegetables are predicted to see inflation of between three to five per cent.

Projections for bakery items and dairy are in the middle, with predicted increases of two to four percent.

At the lowest end? Seafood and fruit, with projected increases of one to three per cent in 2025.

Produce vendor noticing improvements

In Calgary, fruit and vegetable wholesaler Freestone Produce has become known for prices cheaper than those at a full-service supermarket; it has cars lined up onto the surrounding roads since the parking lot is full for much of the day.

Ali Soufan, whose family owns the store, says they have been noticing price pressures on their products - and their customers - for several years now.

"So stuff we used to sell for five dollars 10 years ago? It's now 10 [dollars]... things naturally are going up. Everybody understands it," said Soufan.

"Since 2021, it's just been reality."

The retailer said he's noticed that price increases have started to slow down and says projected cost increases for vegetables are workable for his business.

"Three to five per cent? We can live with that," said Soufan in relation to predicted vegetable cost increases.

"That's actually kind of positive news that it's not jumping up 10, 15, 20 per cent like it was before," he added. But he pointed out that customers are very price-sensitive at his store.

"If strawberries are $10 a case, we might have customers come in and buy five boxes," he pointed out. But when prices climb, he sees people buying much less and believes they stick to their budget for a specific item.

Weak dollar and climate change are factors

One factor in increasing produce costs could be a weaker Canadian dollar, with the report's authors pointing out that since many food products are imported, a lower loonie means imports become more expensive.

"The dollar's at around $0.71 versus the greenback, and we're not seeing that dollar increase anytime soon. If anything, we're expecting a lower dollar," said Charlebois, who directly connected the dollar with grocers' buying power in Canada.

The report also points to "extreme weather" and climate change posing difficulties for food producers, noting there are high cocoa prices in West Africa due to drought and orange juice prices are going up due to flooding in Brazil. Wildfires blocking railway lines in parts of Canada have also posed issues for the supply chain and can drive up costs.

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Climate change and weak Canadian dollar expected to push up your grocery bill next year | CBC News

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An annual report on food prices in Canada is predicting more pressure on grocery costs in the coming year - but also noted that some increases in 2024 weren't as bad as previously predicted.

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Chapter 8-9: what I learned + link to relevant article 

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Chapter 8-9: what I learned + link to relevant article 

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In chapter 8 and 9, I learned about the labour market again, the production function was interesting because of the diminishing returns on capital, because of idle machinery or unproductive workers. I learned about the marginal product of labour and capital, which I thought was interesting because it measures the output and thus benefit of adding an additional unit of either one. Moreover, I found the MRPK/MRPL (marginal revenue product of capital/labour) and UC (user cost of capital) pretty fascinating because it is essentially a cost-benefit analysis, which is quite straightforward even though it seemed complicated at first. I learned that the user cost of capital takes in depreciation and real interest rates, and isn’t just the actual cost of purchasing the capital. I learned that there is an optimal amount of capital firms should purchase (k*) and we can find it out by calculating the MRPK and user cost and seeking to optimize it so that we can get the most revenue for the least relative cost.

-Labour Market and Unemployment rate this quarter:

https://www.rbc.com/en/thought-leadership/economics/economy-and-markets/macroeconomic-outlook/quarterly-canadian-outlook-low-but-positive-growth-ahead/

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Quarterly Canadian outlook: Low but positive growth ahead

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Canadian growth is tracking closer to the least negative scenarios from earlier in the year.

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Chapter 10: what I learned + link to relevant article 

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Chapter 10: what I learned + link to relevant article 

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I learned about the closed economy, and how it relies on the interesting dynamic between savers and borrowers, who interact for liquidity in the market of loanable funds, a market by which supply = savers who provide funds to beat inflation rate by growing their money and earning high returns. I learned about how interest rates are determined in an open economy, through the formula r = rw. It was interesting to see how savers/borrowers affect the interest rates by choosing to borrow/save in different economies depending on the return/cost, which ultimately makes r = rw in the long-run.

Article: a report by the Bank of Canada, in which they examine interest rate policy in the country, loanable funds, and the influence of trade tensions on monetary decisions.

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Tariffs are significantly higher than they were at the start of 2025, and it is extremely difficult to predict how US trade policy will play out. Canadian economic activity has slowed but is showing signs of resilience. While inflation is close to 2%, underlying inflation has picked up.

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I learned that the aggregate demand curve shows the relationship between the aggregate price level and the quantity of output demanded in an economy. The AD curve slopes downward due to two key effects: the wealth effect (higher prices reduce purchasing power and spending) and the interest rate effect (higher prices increase interest rates, reducing investment). I also learned about the distinction between short-run and long-run aggregate supply—the short-run AS curve is upward sloping because nominal wages are sticky, while the long-run AS curve is vertical at potential output. Economic fluctuations occur through demand shocks (which move price and output in the same direction) and supply shocks (which move them in opposite directions). The economy is self-correcting in the long run through nominal wage adjustments that restore equilibrium at potential output.

The article is about how changes in household consumption affected AD to the right in the US in 2024, and drove GDP growth along the SRAS curve, like in the AD-AS model.

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U.S. economy grew at a healthy 2.3% pace last quarter, driven by increased consumer spending

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Economy showed solid fourth-quarter growth, though roughly a percentage point below economist expectations.

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What I learned in chapter 13 + recent article 

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What I learned in chapter 13 + recent article 

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I learned that fiscal policy involves the government’s use of taxes, transfers, and purchases of goods and services to shift the aggregate demand curve. Expansionary fiscal policy (increased spending or reduced taxes) shifts AD rightward, while contractionary fiscal policy shifts it leftward. The fiscal multiplier effect means that changes in government spending have a more powerful impact than equal-sized tax changes because some tax changes are absorbed by savings. I also learned about automatic stabilizers (like progressive taxes and unemployment benefits) that reduce economic fluctuations without government intervention. An important economic concern is that persistent budget deficits lead to growing public debt, measured by the debt-GDP ratio, which can cause crowding out and create long-run risks including potential debt spiralling out of control.

The article shows the Canadian government debt-to-GDP ratio is concerning and not meeting targets, as the deficit is increasing.

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I learned that money serves three essential functions: medium of exchange, store of value, and unit of account. The money supply has evolved from commodity money (like gold) to fiat money backed only by government authority. The Bank of Canada measures money supply in different ways (M1+, M2, M3), with broader definitions including increasingly less liquid assets. Banks play a crucial role in creating money through the fractional reserve banking system—when deposits are made, banks lend out excess reserves, creating a money multiplier effect. The reserve ratio determines how much money the banking system can create from an initial deposit. The Bank of Canada (Canada’s central bank) controls the monetary base and regulates banks through reserve requirements and capital requirements to ensure financial stability and prevent bank runs.

The article is about theBoC reducing its policy interest rate to 3.25% in December 2024, using a tool of monetary policy as inflation returned near the 2% target. ﻿The article shows the BoC’s role as the central bank in controlling the money supply and interest rates through monetary policy. By lowering interest rates, the BoC is utilizing expansionary monetary policy to stimulate economic activity by encouraging consumer spending and business investment.

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Bank of Canada reduces policy rate by 50 basis points to 3¼%

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The Bank of Canada today reduced its target for the overnight rate to 3¼%, with the Bank Rate at 3½% and the deposit rate at 3¼%.