Overview of Economics

Chapter 4 introduces the economic language that sits behind market behaviour. It covers growth, the business cycle, employment, rates, inflation, trade, and exchange-rate relationships so students can interpret why markets move rather than simply observe that they do.

Students should use this chapter to build causal links. The exam often asks how one economic change affects another variable, such as how inflation expectations influence rates, or how a slowdown changes employment and policy decisions.

Exam Focus

• Track the relationship among growth, inflation, unemployment, and the business cycle.
• Explain how interest rates and exchange rates influence investment decisions and asset prices.
• Distinguish nominal results from real economic effects when inflation or currency changes are involved.

In this section

• Defining Economics, Scarcity, and Market Choice
  The core language of economics, including scarcity, opportunity cost, microeconomics, macroeconomics, and the basic logic of supply and demand.
• GDP, Real Growth, and Productivity
  GDP, nominal versus real growth, per-capita measures, productivity, and the main ways economists assess economic performance.
• The Business Cycle and Economic Indicators
  Expansion, peak, contraction, trough, and the leading, coincident, and lagging indicators used to assess where the economy is in the cycle.
• The Labour Market, Unemployment, and Wages
  Unemployment, labour force participation, wage pressure, with labour-market conditions affect inflation, consumption, and policy.
• The Role of Interest Rates in Markets and Valuation
  How nominal and real interest rates work, why bond prices move inversely to yields, with rate changes affect equities and financing decisions.
• The Impact of Inflation on Purchasing Power and Returns
  Inflation, CPI, purchasing power, real returns, with inflation and deflation affect different asset classes and investor decisions.
• International Finance, Trade, and Exchange Rates
  Exchange rates, trade flows, capital flows, and the balance of payments, and why global shocks matter to Canadian investors.