ABSTRACT
This chapter analyzes the major development problems and evaluating the economic consequences of positive solutions to these problems. There are two assumptions of the model that have to be modified. The first involves the substitution price for crude oil and the second deals with the analysis of consumption. The substitution price is affected by the net rate of inflation which is assumed to be totally exogenous to the model. There are two main causes which generate inflation: the exogenous growth of import prices; and the discrepancy between supply and demand which results from the rigidity of the economic system. Significant source of domestic expenditure is the debit side of the balance of payments. There are three major categories of expenditure: salary remittances, investment income payments and government expenditure abroad. The economic future of Saudi Arabia is bright but the task of national leaders is arduous. They must constantly watch inflation rate which, if too high, can severely damage the economy.
