DRecession in Canada, induced by a recession in the U.S., will be more moderate
ID: 1148097 • Letter: D
Question
DRecession in Canada, induced by a recession in the U.S., will be more moderate as far as a number of sectors of the Canadian economy are not directly affected.
There is a saying that if the United States sneezes, Canada catches a cold. In common understanding it means that a recession in the United States causes a recession (perhaps a more severe recession) in Canada Source: Jean Boivin, "The 'Great' Recession in Canada. Perception vs Reality," Bank of Canada, March 28, 2011 Why would the Canadian economy follow the U.S. economy into a recession? OA. A recession in the U.S. causes imports in Canada to raise, consumers and investors in Canada become optimistic and enlarge purchases. O B. A recession in the U.S. causes Canadian exports to increase, consumers and investors in Canada become optimistic and enhance purchases causing a deficit. C. A recession in the U.S. causes imports trom Canada to fall, consumers and investors in Canada become pessimistic and curtail purchases. OD. Canada's economy is not dependent on the recession in the United States. Is it always the case? A. A slowdown in the US. always causes a bigger slowdown in Canada as well as in other countries of the world O B. A slowdown in the U.S. always causes a smaller slowdown in Canada because all sectors of the Canadian economy are directly affected ° C. Recession in Canada will always be more moderate than in the US, as far as the U.S. is only one of the trading partners of Canada.Explanation / Answer
1) The answer to the first question is "C". When there is a recession in the US the Canadian exports suffer because Canada exports a huge amount of goods to the US. Due to which the Canadian economy also faces recession whenever there is a recession in the US.
2) The correct answer to this question is "D". Recession in Canada induced by the recession in the US will always be moderate because it doesn't affect all the sectors in the Canadian economy. Only those sectors directly dependent on the US will be affected more others not so much.
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