Canadian Regulatory Policies
1.
The Depression taught Canada how to deal with economic shocks of demand and supply. Since then Canada has utilized reviewed and updated policies to regulate the economy.The fiscal policies are geared towards keeping the goods market stable while the Monetary policies are geared towards keeping the financial markets in equilibrium through the exchange rates, interest rates and money supply.
Monetary policy in Canada aims to increase output and income and simultaneously keep inflation at its low target rate. David Dodge, Governor of the Bank of Canada to the School of Policy Studies, explained how monetary and fiscal policies in Canada work. According to Dodge, if the economy is at its potential and a negative demand shock occurs, it will put downward pressure on inflation(away from its target). To bring inflation back up the Bank of Canada lowers its overnight interest rates and through markets, interest rates and exchange rates, the economy?s output increases toward potential and inflation returns to its target .For supply shocks, consider price surprises from sensitive parts of the CPI.(vegetables,fruit,gas,oil). The
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