Explain in detail how the rise in the population age 65 and above expected to influence Canada's GDP

A rise in population aged 65 and above increases stress on public finances and leads to an increase in the dependency ratio in the economy.

There is a decline in GDP and economic growth rate as output generation starts to recede because of lower rates of productivity.

Now, based on the expenditure approach of the GDP whose formula is Consumption + Investment + Government expenditure + Net exports (Exports - Imports)

Consumption in the economy starts to decline because the labor force participation decreases as a greater part of the population is then not a part of the labor force and is thus unemployed.

Thus as less number of people earn and produce output, there is overall less consumption in the economy, because output generation is low and thus incomes are lower, which reduces disposable income in the hands of the public. With limited output generation, employment generation also starts to decline.

Those who earn also end up supporting aged parents or siblings which further reduces disposable income in the hands of the public.

While the elderly consume far more than they earn, which is supplemented by government transfer programs and this increases the social cost of an aging population. They also tend to spend far more on long lasting assets which are a one-time purchase and spend a lower proportion on food, clothing, etc.

Thus unless the elderly consumption patterns exceed the working age population consumption, consumption in the economy will be dormant.

Now in terms of investment, there is a reduction in the rate of investment because income reduces and the savings decline, which ultimately impacts investment as people have less proportion of their income to spend on investments.

Firms also tend to generate less production and output because of limited demand, and rising labor costs which reduces employment generation and thus reduces the capacity buildup and thus investments because of lower aggregate demand in the economy, thus aggregate supply reduces, lowering investments.

Government expenditure in the form of developmental expenses and in the form of capital expenditure, which builds future income also recedes as first and foremost, income generation declines, which reduces the tax base of the government, thus there is a decline in tax revenue and the government does not have enough to spend which reduces the proportion of government expenditure as sources of revenue generation decline.

On top of that the government has to spend extensively on transfer payments which are applicable to the aged population base in order to support their healthcare and income resources. This increases the burden on the government which then leads to greater public deficit.

In addition as domestic demand and output generation tends to be lower, there are less exports as the country does not have enough labor force to scale production levels drastically. It then increases demand for imported products, which worsens the net exports in the economy. As per capita output tends to increase and amount of capital per worker, plus wages start to inch higher, overseas consumers end up paying far more for imported products from Canada because of wage growth leading to further reduction in exports.

Thus all in all, all components of the GDP get strained.