Is currently Canada experiencing an inflationary gap or a re

Is currently Canada experiencing an inflationary gap or a recessionary gap? how can you tell

Solution

Inflation rate in Canada has been consistently at the low level at 1.3% since 2008 great depression. Inspite of inflation at its lowest level, the centralized bank, Bank of Canada believes that the low inflation rate is due to factors such as nearly full state of employment and excess output. However, many experts believe that low inflation will continue to exist in the near future due to pressure on wage rates, technological innovations, electricity subsidy and low prices of exportable items. It is a fact, that globalization and technological advancement are exerting pressure on the wage rates in the country that are keepiing inflation below the 2% mark. There also has been rise in the imports of the Canada during past some years that also contribute in keeping inflation at the low level.

Deomgraphic pattern of Canada has also changed considerably over past one decade. Change in demographic pattern or population growth impacts economic growth, employment rate and inflation in a country at slow pace. Therefore, the present inflationary gap or level of Canada is extremely complex that must be watched closely how it fluctuates in the comiing days.