Gross Domestic Product - GDP Essay

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Demand for fuel in the United States does not necessarily create a benefit to the U.S. economy. What it does is allow Canada to sell more fuel to the United States. Moreover, American firms trade more with Canada as they begin to ramp up their economy. These trends mirror the trends with the Mexican economy as well, that country being another key supplier of both energy and general trade to the U.S.

In 2008, we can see higher fuel costs impact both economies. Canada's GDP increased 8.1% as a result of higher prices paid for its energy. By contrast, higher fuel prices forced U.S. businesses to slow down their pace of growth, and the nation recorded relatively soft GDP growth as a result. The slowing demand in the U.S. reduced Canada's energy output, but the higher prices compensated for that (Scotton, 2008).

Overall, the United States has seen strong growth in GDP over the past five years. This reflects a trend of strong growth that only recently began to slow down. Its main trading partner and energy source Canada, saw similarly strong growth, but with year-over-year differences that relate to the nature of energy trade between the two countries.

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From the U.S. perspective, their dependence on energy has had a noticeable affect on economy growth. When energy prices are high, growth contracts. The government needs to take several steps to address this issue, such as developing domestic energy sources, and finding ways to encourage improved energy efficiency.

For Canada, the long-term future looks very promising. That the country gains from high energy prices offsets somewhat the dependence on U.S. trade. Diversifying markets would help to offset the potential negative impacts of a prolonged slowdown in the U.S. economy. For example, GDP in late 2008 and early 2009 will not be offset by high energy prices, and those figures can be expected to be poor relative to the U.S. As a result.

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