David Ricardo: The Economic Condition Of Canada

Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. Economics are based on theories, principles and models that provide valuable knowledge for making decisions in the world and in everyday life. Economists produce these principles from conducting research, collecting and analyzing data and developing forecasts on a wide variety of issues. Economists provide a mean to understanding the interactions in a market-driven society, having the most policy influence of any group of social scientist. The ultimate goal of economics is to improve the living conditions of people's everyday lives. The economic condition of Canada is “largely” influenced by current economic

Ricardo's developed a classical theory called, “The Theory of Comparative Advantage”, regarded as the classical theory of international trade. This theory explains how countries engage in international trade even when one country can produce goods at a lower opportunity cost. Comparative advantage is a way for countries to gain in trade with the specialization for the greater good, with that a lower marginal cost can be produced. This theory is the main bases for most economists’ belief in free trade. Ricardo is also known for his thesis called, “The Theory of Rents”, one of the most important and firmly established principles of economics. Ricardo defined rent as, “That portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.” The major features of Ricardian theory of rent are, rent is the factor income of land, rent increases with the increase population, rent does not enter into price, as well, rent arises both intensive and extensive. This theory directly ties between the productive capacity of the land and the marginal productivity. Ricardo had another theory with the support of Adam Smith and Karl Marx, called, “ The Theory of Value”. The theory was an early attempt by economists to explain why goods were exchanged for certain prices on the market. It suggested the value of a

Keynes had written a book about three theories, the first being called, “Theory of Employment”, based on the view in the short run. Keynes assumed that the factors of production, such as efficiency of labour, remain unchanged while determining the level of employment. Therefore, the level of employment is dependent on national income and output. In 2016, Canada had a national income of 1.575 trillion purchasing power parity (PPP) dollars and an unemployment rate of 5.9 percent. While in 2012, Canada had a national income of 1.439 trillion PPP dollars and an unemployment rate of 7.2 percent. Keynes theory does prove that if there is an increase in national income, there would be an increase in level of employment. Keynes second theory was called, “Theory of Interest”, in liquidity preference. Interest is the price paid for saving of capital, the price of saving is determined by its demand for supply of savings. Keynes's analysis focuses on the demand for and supply of money as determining interest. The liquidity preference theory talks a lot on income, output and employment of a country. Keynes's basic purpose was to demonstrate that a capitalist economy can never reach full employment due to the existence of liquidity. Keynes third theory was called, “Theory of Money”,