Figure13-8The Canadian Federal Budget Deficit and the Unemployment Rate, 1975–2012 There is a close relationship between the budget balance and the business cycle: a recession moves the budget balance toward deficit, and an expansion moves it toward surplus. Here, the unemployment rate serves as an indicator of the business cycle, and we should expect to see a higher unemployment rate associated with a higher budget deficit. This is confirmed by the figure: the budget deficit as a percentage of GDP moves closely in tandem with the unemployment rate.
Sources: Statistics Canada; Public Accounts of Canada; Department of Finance.
Sources: Statistics Canada; Public Accounts of Canada; Department of Finance.