The second stage is the transmission of effects from the financial conditions to economic activity and prices; in other words, the extent to which firms and households actually take advantage of the accommodative financial conditions to increase their investment and spending (Chart 13).
It is important to understand the effects of such changes, given their implications for both aggregate supply and aggregate demand, and for our standard of living. Movements in our terms of trade present important challenges and opportunities for Canadian businesses, individuals, and governments. Although adjusting to economic change is never easy, how we respond to change has a real impact on our economic well-being.