"Here is a short background regarding Canada's economic development history. In the early 1990s, Canada experienced unfavorable economic situation. The country experienced persistent inflation and high consumer price index (CPI). As a result, Canadians protected themselves by taking advantage of inflation by speculating in real estate or other assets. Because many of these transactions were financed by borrowing, debt had ballooned to high levels. Businesses also adjusted by restructuring and downsizing. Therefore, unemployment rate increased, and salaries were held and reduced. Aside from these, public debt also accumulated at an alarming state. There was large budget deficit, both federal and provincial. This resulted in high interest rates because of the incorporation of risk premiums into interest rates.
How did Canada solve these economic problems? How did Canada's economy changed in the early 1900s? This is how Canada solved these economic problems:
Canadian government, both federal and provincial, responded effectively by cutting fiscal deficits and slowing down the accumulation of public sector debt. Thus, the overall government sector moved from a total deficit of around $45 billion to surpluses thereafter. Fiscal restructuring improved economic performance. It reduced deficits and resulted to surpluses. It declined debt levels of the government and eliminated risk premiums of interest rates. Like the private sector, the public sector also undertook significant downsizing and salary restraint.
Aside from that, Canada implemented anti-inflationary measures and restrictive monetary policies which brought down inflation.
This is part of Canada's economic growth history.
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