CSC Chapter 4

Canada’s interactions with the rest of the
world which are captured here in the current
account and capital account.

The recurrence of periods of expansion and
recession in economic activity. Each cycle
is expected to move through five phases –
the trough, recovery, expansion, peak,
contraction (recession). Given an
understanding of the relationship between
the business cycle and security prices an
investor or fund manager would select an
asset mix to maximize returns.

Account which reflects the transactions
occurring between Canada and foreign
countries with respect to the acquisition of
assets, such as land or currency. Along with
the current account a component of the
balance of payments.

Statistical data that, on average, change at
approximately the same time and in the
same direction as the economy as a whole.

Statistics Canada combines 10 leading indicators into a single index of leading indicators,called the Composite Leading Indicator:
1. S&P/TSX Composite Index
2. Real Money Supply (M1)
3. United States Composite Leading Index (which attempts to anticipate American demand for
Canadian exports)
4. New Orders for Durable Goods
5. Shipments to Inventory Ratio – Finished Goods
6. Average Work Week
7. Employment in Business and Services
8. Furniture and Appliance Sales
9. Sales of Other Retail Durable Goods
10. House Spending Index (includes housing starts and house sales)

Price index which measures the cost of
living by measuring the prices of a given
basket of goods. The CPI is often used as
an indicator of inflation.

A type of inflation that develops due to an
increase in the costs of production. For
example, an increase in the price of oil may
contribute to higher input costs for a
company and could lead to higher inflation.

Account that reflects all payments between
Canadians and foreigners for goods, services,
interest and dividends. Along with the
capital account it is a component of the
balance of payments.

The amount of unemployment that rises
when the economy softens, firms’ demand
for labour moderates, and some firms lay
off workers in response to lower sales. It
drops when the economy strengthens again.

A sustained fall in prices where the annual change in the CPI is negative year after
year

Ch 4

A type of inflation that develops when
continued consumer demand pushes prices
higher.

Individuals that are available and willing to
work but cannot find jobs and have not
made specific efforts to find a job within
the previous month.

A decline in the rate at which prices rise
– i.e., a decrease in the rate of inflation.
Prices are still rising, but at a slower rate.

Statistics or data series that are used to
analyze business conditions and current
economic activity. See also leading,
lagging, and coincident indicators.