Suppose that the real rates of growth in the US and Canada a

Suppose that the real rates of growth in the U.S. and Canada are both 2%, inflation rate in Canada is 9%, and the U.S. dollar is appreciating against the Canadian dollar by 4% per year. What is the U.S. money growth rate?

Solution

U.S. Money growth rate = Real growth rate + Inflation rate

= 2 + 9

   = 11 %

Conclusion:- U.S. Money growth rate = 11 %

Note:- In macroeconomics, the real rate of growth (r) is the difference between the money growth rate (i) and the expected inflation rate (p^e). From this basic equation, any of the missing variable can be found out if the two other variables are given in the question. This same process is applied in this question.