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Relationship between Money Supply and Inflation in Saudi Arabia - Speech or Presentation Example

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The econometrics are employed in the "Relationship between Money Supply and Inflation in Saudi Arabia" paper to show the correlation involving money supply and inflation. Borrowing from the domestic market to supplement the government budget could reduce financial resources for the private sector…
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Relationship between Money Supply and Inflation in Saudi Arabia
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Download file to see previous pages Over the recent past, the effects of money supply, debt and inflation have become contentious issues for debate. Furthermore, frequent cautions concerning the risk of very large budgetary deficits aver that this would send up the upcoming state debt and capital rate as indicated by the rates (interests). As a nation, Saudi Arabia has a bi and enduring budgetary deficit over the past two decades and the government has been forced to go into the market so as to have loan access and to make up for the deficits. Given the impact of this on inflation and other economic variables, it's imperative and of great alarm for strategy architects (strategists) to understand how microeconomics has an effect on money supply, financial plan deficits, and the way these activities can influence the line of monetary development.

Generally, the money supply can be defined as the overall or the sum of the cash amount that is in circulation or is available in a particular country. Money supply, on the other hand, can be equated to the monetary base (i.e. the total worth). In order to understand the monetary base comprehensively, two alternative empirical definitions will be provided in the literature.

Lucas (1995) has always put emphasis that there is a long run connection connecting money supply to the prices of goods. Inflation and money supply cannot be separated and where there is inflation, there is a monetary phenomenon. The increase in money supply is the root cause of the increase in prices of commodities and this is what constitutes the central dogma of inflation.

Inflation has been categorized as either domestic or imported. This is because inflation may come as a result of the increased cost of imports (high prices on imported goods) and services from within the country or due to the monetary exchange rates (Jackson & Miles 2006). Inflation is hence the product of the interrelations between money supply and production.  ...Download file to see next pagesRead More
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