1.0 Introduction This section explains how each variable will be used in the analysis as well as its importance. Where needed, the reasons for using a particular value will be described. At the end of the section the sources of data will be given. Development and growth is the main aim of many countries, Oman is not excluded from this policy of industrialization and development, the core principal of most macroeconomic policies is to come up with and develop high economic growth with if possible no inflation at all cost.
Many scholars have continuously debated over the same issue of any existence between growth and inflation. Bothe classical and neo classical economist agree that low inflation rate in an economy is positively related to economic growth. (Bradley, 2007) In this study we want to find out the relationship between the inflation and the growth in Oman country. The variable to be study includeGross domestic product at current pricesGross domestic product pppGross domestic per capita pppReal Gross domestic product growthCurrent account balanceCurrent account balance Gross domestic productGoods and services expenditure Gross domestic productInflation rateGross domestic product at current pricesThis GDP is also called nominal GDP and is always calculated at the current market prices.
While calculating nominal GDP changes in prices which has taken place due to inflations or deflation are factored in that current year. Inflation can be said to be the general increase of price level of goods within a given economy while deflation can be said to be the general fall in prices of goods within the economy. This GDP is very important in knowing the currency stability within the economy and also the economic growth of a country since it factor in the changes in price within the year.
(Krugman, 1987)1.1.2Gross domestic product purchasing power parityGDP purchasing power parity is one of the economic theories used to calculate and determine the general currency value. It is used to estimate the amount which needs to be adjusted to a given exchange rate among countries for them to be equal or at par with each other. If you take two countries like united state and England, one need to know how much US dollars is needed to purchase the same goods at 10 England pound and that will give as the purchasing power (Krugman, 1987). .
After getting the purchasing power parity rate, one is able to calculate the exchange rate of different countries. 1.1.3Gross domestic per capita purchasing power parityAs stated earlier, purchasing power parity is an economic theory used in determining the exchange rate. The Gross domestic product purchasing power parity per capita is the total number of final goods and services produced within a country in a given year then dividing the total with the average country population of that year.
Purchasing power parity is very important in computing the GDP of different countries and comparing the general difference in the living standards between different countries as a whole since it take into consideration majorly cost of living and also consider the price changes due to inflationary and deflationary factors.