Overview
CT- Module 11: Exchange Rate Determination
This module explores the factors that determine currency movements: market fundamentals and market expectations.
Saudi Arabian Riyal and the U.S. Dollar
While Saudi Arabia seeks to diversify its economy, the Saudi economy is dominated by the petroleum sector. In addition, the Saudi Arabian Riyal (SAR) is pegged to the U.S. Dollar. For this week’s discussion, please answer the following questions:
-What are the advantages and disadvantages of the pegged exchange rate?
-Analyze the effect on the economy of Saudi Arabia (GDP, interest rates, inflation, and trade balance) given two scenarios when there is a dramatically declining world oil price or dramatically increasing world oil price.
Directions:
- Your essay is required to be five to six pages in length, which does not include the title page and reference pages, which are never a part of the content minimum requirements.
- Support your submission with course material concepts, principles, and theories from the textbook and at least three scholarly, peer-reviewed journal articles. Use the Saudi Digital Library to find your resources.
- Use University academic writing standards and follow APA style guidelines.
- It is strongly encouraged that you submit all assignments into Turnitin prior to submitting them to your instructor for grading. If you are unsure how to submit an assignment into the Originality Check tool, review the Turnitin – Student Guide for step-by-step instructions.
Review the grading rubric to see how you will be graded for this assignment.
Learning Outcomes
- Describe the structure and workings of the global foreign exchange market.
- Analyze how exchange rates are determined by the currency supply and demand.
- Analyze the determinants of exchange rates in the short, medium, and long term.
Readings
Required:
Chapter 12 in International Economics
Chen, J. (2022, July 21). Exchange Rates: What They Are, How They Work, Why They Fluctuate. Investopedia. Retrieved October 12, 2023, from https://www.investopedia.com/terms/e/exchangerate.asp
Recommended:
Chapter 12 PowerPoint slides
Saudi Arabia shifting fiscal policy to further boost non-oil growth in 2024: Fitch. (2023, October 10). Arab News. https://www.arabnews.com/node/2388616/business-economy