Module 11: Exchange Rate Determination
Module 11: Exchange Rate Determination
Critical Thinking: Saudi Arabia’s Currency 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.
In a critical essay, indicate the main considerations Saudi Arabia faces from a currency perspective (e.g., currency values, interest rates, inflation, and trade issues) that ensue given two scenarios:
- The first scenario is a dramatically declining world oil price.
- The second scenario is a dramatically increasing world oil price.
Analyze the results you expect from each scenario.
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