Economics problem help please, recession in US how it effects canad

[apohle44]

Homework Statement

a) The share of American spending on Canadian goods is about 80% of Canadian exports, which are themsevles equal to about 45% of GDP. What is the share of American spending on Canadian goods relative to Canadian GDP?

b)Assume the multiplier in Canada is 2 and that a recession in the US has reduced output by 5% (relative to its natural level). What is the impact on the US slowdown on Canadian GDP?

c) If the US recession also leads to a slowdown of the other economies that import goods from Canada, the effet could be larger. Assume exports fall by 5% ( of themselves). What is the impact on the Canadian GDP?

d)Comment on the following statement from an economist on television: "Unless the US recovers from recession quickly, growth will grind to a halt in Canada."

Homework Equations

The Attempt at a Solution

a) So if American spending on Canadian goods is about 80% of Canadian exports, which are themsevles equal to about 45% of GDP. Then to find the share of American spending on Canadian goods relative to Canadian GDP we should take .80 times the 45% which is 36% so the share of American spending on Canadian goods relative to Canadian GDP is 36%?
b)If Canada’s output decrease by 5% then that would decrease Investment and also decrease imports right? But we cannot calculate how big the decrease on I and IM so how are we suppose to calculate the GDP?
Don't know how to do rest

 

[nate808]

a) Yes, your calculation is correct. The share of American spending on Canadian goods relative to Canadian GDP is 36%.

b) The impact of the US slowdown on Canadian GDP can be calculated using the multiplier effect. Since the multiplier in Canada is 2, a 5% decrease in US output would result in a 10% decrease in Canadian GDP. This is because the decrease in US output would lead to a decrease in American spending on Canadian goods, which would then decrease Canadian GDP by 10%.

c) If the US recession also leads to a decrease in exports by 5%, this would further decrease Canadian GDP by 5%. This is because a decrease in exports would lead to a decrease in Canadian production, which would then decrease GDP by 5%.

d) The statement from the economist is not entirely accurate. While a quick recovery from the US recession would certainly benefit Canada's economy, it is not the only factor that determines economic growth in Canada. Other factors such as domestic consumer spending, government policies, and global economic conditions also play a significant role in determining the growth of Canada's economy.