6. Inflation
COUNTRY RATE
Saudi Arabia
2.8%
United States 1.1%
Venezuela
57.3%
Japan 1.5%
Egypt
9.8%
Russia
6.2%
Spain -0.2%
UAE 1.8%
Greece -1.1%
Iran 28.8%
Syria 49.5%
Source:Trading Economics April 2014
14. Quantity Theory of Money
M x V = P x Y
M = Money
V =Velocity
P = Prices
Y = Output
15. Quantity Theory of Money
MV = PY
AssumeV is constant
then an increase in M will
only increase P orY
16. Quantity Theory of Money
MV = PY
Increasing M will either
increase prices or output
or both
17. Quantity Theory of Money
1. V is constant
2. Change M will change P xY
3. Y is a function of capital
4. If M is increased then P is increased
5. Therefore increasing M will increase
inflation
26. Three Tools
of Central Banks
Open-Market Operations
Discount Rate
Reserve Ratio
27. What did SAMA do to
fight the financial crisis in
2008?
Dropped the ORR from 5.5%
to 2.0%
Dropped the Reserve Ratio
from 13 percent to 7 percent
28. SAMA Official Repo Rate
Dropped from
5.5% October 2008
to 2.0% by January 2009
3 month period of
global financial crisis
Rate increased
as economy
heated up