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Economics Term Paper

Essay by   •  February 13, 2012  •  Essay  •  495 Words (2 Pages)  •  1,535 Views

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Imports of Services

According to the Macroeconomics textbook, imports of services in Canada is defined as the value of all domestic services purchased from firms, households, or governments in other countries. Imports of services have a direct connection to the Gross Domestic Product (GDP) in the sense that imports must be subtracted from the GDP equation. This is because as imports of services are considered a leakage from the circular flow of GDP, therefore as imports of services from other countries increase, the GDP will be forced to decrease, which is bad for the Canadian economy.

According to CANSIM, the imports of services continually increased from 1987 until 2008, as shown in Figure 1. This continual increase over twenty-one years could be caused by many different factors within Canada or the countries from which it receive its imports. One of which could include the immigration of people from China to Canada. This is because the migration of people to Canada from the countries, which Canada receives its service imports from, would cause an increase in the competitiveness of the consumer market. An argument such as this can be interpreted based on the fact that, as seen specifically in Figure 2, service imports gradually increase by anywhere between approximately $2,000 and $6,000 per year over a time period of twenty-one years. According to an online article called, Economic Impact of Immigration to Canada, immigration has also been an important boost to Canada's international trade due to their expertise, linguistic skills and personal connections with their country of origin. Although international trade is concerned with not only imports, but exports as well, this article shows the effects that immigration has on service imports in a larger picture.

However, after twenty-one years of increasing service imports, Figure 2 shows that in 2009, imports decreased by $4,639 from the prior year. This decrease in imports could have also been caused by many factors, such as a decrease in migration from countries that Canada receives service imports from. This decrease in service imports would create a positive impact upon the GDP.

In conclusion, the changes in imports of services yearly can have either a strong affect on the economy. In the years that service imports were increasing due to factors such as immigration, it would have caused the GDP to decrease more and more each year causing a negative affect on the economy. However, in 2009 when imports of services began to decrease by a substantial amount, the GDP would have increased, therefore creating a positive affect on the economy. Overall, it is important to know what factors can cause imports of services to increase or decrease, and the affects that it will have upon the GDP and the economy as a whole.

WORKS CITED

Economic Impact of Immigration

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