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Q. Global Insight (GI) forecasting firm predicted which the Canadian economy will shrink by 1.4 %on an annualized basis in the last quarter of 2008 also a further 1.2 %in the 1st quarter of 2009. The firm sees substantial job losses as the recession takes hold. (10 marks)
a) Illustrate what evidence does GI present to support the view which Canada had entered a recession?
b) Use a short-run Phillips curve to Explicate why the inflation rate may decrease over the course of 2009.
c) Under Illustrate what circumstances might the inflation rate not decrease during 2009?
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