Chapter 3

http://www.vancouversun.com/business/Expect+rate+home+building+slumps/1048374/story.html

Summary:

Due to the economic downturn in the economy, not only United States but Canada as well, the Bank of Canada has decided to cut interest rates down to 2.25%. Housing constructions have been reduced by around 8% compared to the previous year. Since the housing industry prices have dropped, the Bank of Canada decided to cut back on interest rates. Also, unemployment has been at an all time high in the US – approximately 533,000 people are jobless (around 6.7%). However, Canada’s experience in unemployment is just a miniscule quantity better than the US, with a 6.2% (71,000 people) laid back on their jobs. Interest rates are starting to become more lenient in Canada, giving the citizens the opportunity to purchase houses at a lower interest rate.

Connections:

In relation to Chapter 3 of our textbook, unemployment triggers low net income, annually, which affects the gross profit of an individual. In other words, less income tax will be paid at the end of a tax season for the government. The government will not be receiving as much tax as the previous years. Income of a company or a particular individual is used to calculate the amount of income tax to be paid at the end of the year. However, the Bank of Canada will not be gaining as much money as before when the interest rate was high. Now that it reduced to 2.25% for the housing industry, the government will be stimulating the economy with hopes up high.

Reflection:

To come to think of it, the prices of the estates will be reduced and there will be more people purchasing houses. In other words, with the interest rate reduced to 2.25%, many people will want to buy a house when the prices are low so they can save more. I think the interest rate should be boosted down a bit more so it will be attempting for the citizens of Canada. Also, it will be beneficial to them, as well. With all of that reduced to an all time low, purchasing housings will be easier than before. Unemployment will decrease and more people will have jobs when housings are low, for example, housing construction workers will accept more jobs. In addition, the government does not have to worry about the income tax not being paid or low income. Businesses will be able to purchase estates at a cheap price and more employees will be necessary for hiring.

Article Summarized by
- Jillian Mak