Canada's economy has experienced a period of fragile growth following recent global supply disruptions. In 2023, real GDP growth slowed to just 1.1%, and recent official statistics show a quarterly contraction of 0.2%. The Ministry of Finance attributes the sluggish domestic recovery to external headwinds, particularly the cooling economic momentum in key East Asian trading partners and persistent stagnation in the European Union. However, critics suggest that the central bank's aggressive interest rate hikes to curb inflation have severely dampened domestic consumer spending and business investment, making the recovery far more sluggish than expected.
While some industry coalitions support maintaining fiscal discipline to stabilize the debt-to-GDP ratio, they increasingly argue that targeted public investment in green energy infrastructure and transport corridor upgrades is now essential. They assert that such investments are vital to lower logistics costs, expand industrial capacity, generate skilled employment, and enhance the nation's long-term export competitiveness.
Extract B states: 'The Ministry of Finance attributes the sluggish domestic recovery to external headwinds, particularly the cooling economic momentum in key East Asian trading partners and persistent stagnation in the European Union.'
With the help of an appropriate diagram, explain why low economic growth in Canada's major international trading partners is likely to hinder the recovery of its domestic economy.
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.