I chose to track the Canadian economy for my report. In Dr. Yardeni's website Ilinked onto the World Factbook to research Canada's economy. This is an economy that closely resembles that of the United States. Canada has experienced great growth since World War II in many different service sectors. Despite all the positive information I read, I decided to track two separate recessions in' Canada happening within the last twenty years. The first one began in April 1981 and hit the trough in November 1982. / The second time period I researched was the downfall starting march 1990 and bottoming out in March of 1992. ) At Dr. Yardeni's website I got the graphs of the GDP and all the expenditures of the GDP for Canada. I also printed out a graph of business, financial, and inflation indicators to the GDP. These guided me along in my report and I was able to identify relationships between the graphs.

During my first time period of 1981-1982 the real GDP dropped a total of nearly 8%. This was the most significant recession in Canada's recent history. Would I classify this as a depression? I would say no because while looking at the three D's of a recession (Depth, Duration, Dispersion), I believe this one was lacking the duration. The economy was actually only in a downfall for less than a year and a half. Throughout this recession, the consumer expenditures dropped in proportion to the whole GDP, there was about a 6% decrease. This would make sense because the C part of the GDP = AE = C+I+G+(X-M) equation is about two-thirds the aggregate expenditures. The decrease of capital spending was exaggerated during thts recession. A 35% drop in capital investments was recorded. People were just not looking to put their money into long-term investments. For example in a common business, they were not looking to add new buildings, but more just to purchase the products that were of necessity to running the business in the present time. Government spending was the only part of the GDP expenditures that didn't go into a straight plummet. Looking at the percentages there was actually a.4% increase in government expenditures. There was great drop in the percentage of imports, while the exports decreased also, but not as drastically. I got the graph for the capacity utilization for Canada's manufacturing. At the beginning of this period, there was 83% utilization. At the trough of this recession the utilization had dropped to 66%. This shows that Canada was not producing to their full potential. On the production possibilities curve they would have been way beneath the curve, which results in lost output and the GDP drops.

A financial factor was the interest rate. The interest rate rose during the beginning part of this recession, but then dropped in the second half of the recession. Still the interest rate was at a whopping I I% coming down from nearly 18% in 1981. The lenders were more willing to lend, but the borrowers were less willing to borrow. This affected consumer confidence, and the peoples' overall attitude toward spending their money was changed for the worse. The 1981-1982 recession was a tough time for Canadian people, businesses, and government. This is shown by the percentage decreases in many of the different expenditures.

The second recession I looked at was during the time period of 1988 -1991, but I am focusing my research on 1990 and the trough in 1991. This recession was even worse than that of 1982. This recession had greater duration and depth. Consumer expenditures dropped with great severity. Incomes dropped, wealth dropped, peoples' expectations of the future were also dropping. The capital spending was not affected as much throughout this drop as it was in the earlier recession. This might be a sign that people were just battling to get through the tough times but also at the same time they saw a light at the end of the tunnel and wanted to prepare for that future. Government spending was in an up and down stage, but looking back in history at the graph of government expenditures it has always been very erratic. The trade balance dropped about 20%, both exports and imports losing. During this recession, there was a slight decrease in capacity utilization. Once again showing that when the nation is not producing to its maximum they are constantly losing potential output. In this time period, the percentage bottomed out at 73%. The consumer price index rose 3% during 1990 and 1991. This index tries to represent the "market basket" purchased monthly by the average consumer. The CPI slightly overstates the cost of living, but it does give a good look at what the citizens are dealing with everyday. In this case, the Canadians in the early 90's were paying more and more for everyday things. Interest rates were not greatly affected by this recession in fact they dropped a little bit, which also might relate to why the capital spending rose during the last year of this recession. When the interest rates are reasonably low, consumers will invest more money that they don't have, and not have to worry about paying back great fees on their borrowed money. Overall, these recessions have been harsh times for the Canadians but they are just part of the business cycle. There will always be peaks and troughs, people just need to learn how to survive the recessions and prosper during the booms of the economies they live in.

* Coach's italics, bold type, and underlining.