In 2022, Canada recorded a trade in goods and services deficit of CA12.4bnandacurrentaccountdeficitofCA 12.4bn and a current account deficit of CA\,12.4bnandacurrentaccountdeficitofCA38.1bn. A nation's international competitiveness is largely driven by the relative price and quality of its exports.
In the 2022 global competitiveness report, Canada was ranked 14th out of 140 economies, down two places from its position in 2021. Switzerland took the top spot in 2022.
The competitiveness index evaluates several pillars, including infrastructure, workforce skills, and the strength of the financial system. Canada’s financial system is highly robust. Its central bank, the Bank of Canada, actively manages liquidity, utilizing expansionary tools such as quantitative easing (purchasing government bonds) and lowering target interest rates to stimulate economic activity. Meanwhile, commercial banks actively increase the broad money supply when they expand credit and issue new retail loans to businesses and households.
In terms of workforce skills, Canada ranked 8th. A highly educated workforce enhances productivity. Productivity is also affected by capital investment. Between 2021 and 2022, physical capital investment rose in Canada, leading to an increase in output per hour worked. Conversely, a reduction in capital investment in other regions led to stagnating productivity levels.
Using information from the stimulus material, identify two methods by which the money supply can be increased.
