Here's Leslie. She wants to research the role of our government in our economy.
It looks like she's found what she was looking for.
Economics.
A marvelous choice.
Alright Leslie, where do we start?
Sometimes the government of Canada gets the bank of Canada to lower interest rates.
This is called monetary policy.
Monetary policy? Can you explain?
During a recession, the government spends money into the economy and interest rates go way down.
So people can buy lots and lots of houses.
Don't we want people to buy houses?
But as time goes on, government debt will go way up.
In a few years from now, taxes will rise and interest will rise even higher.
So in the end, the people will not be able to afford their house and their house will go for sale.
Hmm, an interesting summary of interest. What else does the government do?
If the government tries to help out the economy too much during a recession, they can accumulate debt.
Then they might just print out their own money. This can result in inflation.
Okay Leslie, so what is inflation?
What's inflation? Inflation is when the money value goes down and the prices go up.
So you might pay $5,000 for one loaf of bread.
That sounds like a lot of dough. So what else does the government do?
Sometimes the government uses trade regulations to help the economy move.
Some governments believe in the dependency theory.
So what's the dependency theory?
What's the dependency theory?
The dependency theory is when governments believe that the economy should set strict trade barriers
and not allow any imports from other countries.
We've learned that when the government intervenes too much with the economy with taxes, trade barriers and interest rates, the economy falls apart.
So there you have it kids. Remember, stay in school. Don't do drugs.
And make sure that you have a clear understanding of the various political and monetary responsibilities of your government
and their effects on the nationwide fiscal situation.
