Assignment Questions:

1. Over the last few decades, the size of the foreign exchange market has increased significantly. Explain in detail the factors that have fuelled this growth. Why is the US dollar’s most widely used quotation currency in foreign exchange markets? (5 marks)

 

1. Saudi Arabia has recently increased its degree of openness; hence it engaged in a higher level of international (financial & non-financial) activities. Briefly discuss the following along with providing one example:

• How would this affect our economy?
• How would this affect our BoP? Current account & financial account.
• How would this affect our exchange rate?

 

Since it is pegged exchange rate regime, increasing the level of international trade will affect the exchange rate, so how would the Saudi Central Bank react to this? (5 marks)

1. The International Monetary Fund (IMF) regularly publishes its assessment of the prospects for the world economy. Use the IMF’s current analysis to form your expectations of its immediate economic prospects in Saudi Arabia. IMF Economic Outlook:  imf.org/external/

(5 marks)