PAPER - Abraham Dweck Prof EJ Leahy Econ105 MACRO PAPER...

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Abraham Dweck Econ105 Prof. EJ Leahy 1/9/08 MACRO PAPER – COMPARING THE U.S. AND CANADA (“BLAME CANADA”) Over the past few years both the United States and Canada, have seen adjustments in economics. These changes vary from the size of population to GDP and inflation etc… Each country has its positives and negatives of where its economic future is headed. These countries are comparable in some ways and not comparable in others, however, both of their economic make-ups are structurally similar. The United States is a constitutional based federal republic with a strong democratic tradition. From 2005 to 2006 it has seen a change similar to that of the Phillips Curve. Simply put, the Phillips curve means that there is a negative relationship between inflation and unemployment. From 2005 to 2006, the U.S. has seen its unemployment rate drop from 5.1% to 4.8%, however following the curve its inflation rate has raised from 3.2% to 3.3%. This coupled with a rising population and an economy that has seen its imports rise 6%, from 1.727 trillion in 05’ to 1.861 trillion in 06’, and only seen its exports rise 12%, from 927.5 billion in 05’ to 1.127 trillion in 06’. This is one reason that GDP went up, a rise in exports is needed for an economy’s GDP to grow. The US has seen its GDP rise from 12.36 trillion in 05’ to 13.06 in 06’ and more importantly it has seen its GDP per capita rise from $41,800 in 05’ to $43,800 in 06’. I say more importantly because even with a growing population, from 298.5 million in 95’
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to 301.2 million in 06’, the GDP per capita is still rising. This may be misleading as the inflation rate has also gone up leading to higher prices on US goods and services and a higher minimum wage. Other factors include the cost of war on terror, the rising prices in real estate and the government lowered interest rates for loans and mortgages. The former expense will
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