Your task is to replicate BRICS analysis for KSAfor the next 20 years. It is best tobreak up theanalysis in two parts, at first ignoring currency appreciation issuesand then addingreal exchange rate appreciation as wellCoursework for MBA ARAMCO 2022 Global Macroeconomics Alex Michaelides In 2003 two analysts at Goldman Sachs wrote a research report coining the term “BRICs”. These were the main conclusions from the Report: Over the next 50 years, Brazil, Russia, India and China—the BRICs economies—could become a much larger force in the world economy. Using the latest demographic projections and a model of capital accumulation and productivity growth, we map out GDP growth, income per capita and currency movements in the BRICs economies until 2050. The results are startling. If things go right, in less than 40 years, the BRICs economies together could be larger than the G6 in US dollar terms. By2025 they could account for over half the size of the G6. Currently they are worth less than 15%. Of the current G6, only the US and Japan may be among the six largest economies in US dollar terms in 2050. About two-thirds of the increase in US dollar GDP from the BRICs should come from higher real growth, with the balance through currency appreciation. The BRICs’ real exchange rates could appreciate by up to 300% over the next 50 years (an average of 2.5% a year). Your task is to replicate this analysis for KSA for the next 20 years. It is best to break up the analysis in two parts, at first ignoring currency appreciation issues and then adding real exchange rate appreciation as well. There are a number of issues you need to discuss/think about. A key issue for KSA is the non-oil GDP, that is the part that needs to catch up to other economies. A second issue is the potential transition to renewables in KSA and the rest of the world. How might that transition affect KSA? You are asked by the ministry of finance to prepare a written response that is no greater than 5 pages (excluding diagrams and figures) and an EXCEL spreadsheet illustrating your calculations. You can refer to any number of diagrams or calculations in the EXCEL spreadsheet in your writeup. Current prices Expenditure on Gross Domestic Product at Current Prices (Million Of Saudi Riyals) 1970197119721973197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021* 1-Gross Final Consumption Expenditure11,70412,88514,63119,18031,17351,00676,267116,487152,789199,644224,071287,469328,508334,080328,275320,315288,607284,193278,267303,100331,955386,717379,474368,725363,029376,203404,269423,223406,610406,311440,899446,557447,957474,483516,652586,804678,442756,273869,045948,8291,039,5901,169,8231,336,5831,467,2571,649,0131,724,9461,660,0891,694,6221,859,5111,884,5371,901,3202,060,917 a)Govt. Final Consumption Expenditure3,8374,3005,0987,84413,59323,90838,07647,92166,21781,40486,981121,864137,555132,834127,048120,051111,633113,040102,240119,958127,824169,128152,692130,976122,552125,923144,783161,795155,192154,095183,804188,695184,517198,148221,798262,650311,082322,086345,098357,015400,173488,062551,179628,522739,156736,139624,632630,978736,234721,283761,122763,741 b)Private Final Consumption Expenditure7,8678,5859,53311,33617,57927,09838,19068,56786,572118,240137,089165,605190,952201,245201,226200,264176,974171,154176,027183,142204,131217,589226,782237,749240,477250,280259,486261,428251,418252,216257,095257,862263,440276,335294,854324,154367,360434,187523,947591,814639,417681,761785,404838,735909,857988,8071,035,4571,063,6441,123,2771,163,2541,140,1981,297,176 2-Gross Fixed Capital Formation3,0693,5154,8927,74514,24228,61748,35866,76781,83693,680113,438132,262130,767120,238106,05083,87372,69571,66062,55666,39283,251100,480103,955108,82493,002103,316102,848109,241112,959118,196123,324126,095128,066148,098185,872237,691288,680368,687444,499414,452483,921568,793614,906662,455714,253732,432631,838632,232646,871664,690617,582737,658 a)Private60,94676,75387,00693,06180,42090,10589,93493,139100,522105,238106,971108,587109,945124,807155,486182,751229,939284,645334,617302,364322,730350,849367,975412,777449,791462,083437,971456,722467,682502,458463,707637,985 b)Public22,30523,72716,94915,76312,58213,21112,91416,10212,43712,95816,35317,50818,12123,29130,38654,94058,74184,042109,882112,088161,191217,944246,931249,678264,462270,349193,867175,510179,188162,232153,87599,673 3-Domestic Final Demand14,77216,40019,52326,92545,41579,623124,625183,255234,625293,324337,509419,731459,274454,318434,325404,188361,302355,853340,822369,493415,206487,198483,429477,549456,032479,519507,117532,464519,569524,507564,223572,652576,023622,581702,525824,495967,1221,124,9601,313,5441,363,2811,523,5111,738,6161,951,4882,129,7122,363,2662,457,3782,291,9272,326,8552,506,3812,549,2272,518,9032,798,575 4-Change in Stock2,3514,2103,183-15,17235,623821,15613,25417,1835,12411,964-3635,05033,06432,342-3,141-10,032-14,7972,5183,039-14,158-1,51613,93915,94110,0515,5847,5017,46813,35612,27113,9589,40611,9589,6516,87110,61524,88543,98087,56195,884128,660110,103117,61678,678101,204105,996116,270112,777160,812213,387111,0981,441 5- Exports of Goods & Services12,29317,40324,66855,240101,463120,656134,953150,167134,571206,226347,345391,591266,511171,681145,530113,16385,98999,045103,531120,494177,685189,694200,772171,065172,123200,437237,812243,384163,099210,231308,473273,677291,155371,088494,702702,164844,522934,3211,210,701757,711981,8671,410,8411,497,8241,453,6651,329,530817,539753,225899,9751,180,9371,071,975690,6081,086,807 6- Imports of Goods & Services5,2185,7767,31911,58821,28435,75754,79485,154113,508128,736149,437187,591205,502212,775190,639137,892115,239119,170116,352135,961138,207180,199184,746166,590131,976148,720158,239161,782145,616140,570175,973165,219168,114194,041233,814306,503425,038544,434662,568607,759653,261742,414807,023862,128957,686927,402742,913757,409785,960821,028682,979761,044 Gross Domestic Product24,19832,23740,05655,404161,216164,530225,940261,521272,871375,938547,381623,367525,334446,288421,558376,318322,020320,931330,519357,065440,526495,177513,394497,965506,230536,820594,191621,534550,408606,439710,681690,516711,022809,279970,2831,230,7711,411,4911,558,8271,949,2381,609,1171,980,7772,517,1462,759,9062,799,9272,836,3142,453,5122,418,5092,582,1983,062,1703,013,5612,637,6293,125,780 * Preliminary Data Annual Growth Rates of Expenditure on Gross Domestic Product at Current Prices (%) 197119721973197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021 1-Gross Final Consumption Expenditure10.113.631.162.563.649.552.731.230.712.228.314.31.7-1.7-2.4-9.9-1.5-2.18.99.516.5-1.9-2.8-1.53.67.54.7-3.9-0.18.51.30.35.98.913.615.611.514.99.29.612.514.39.812.44.6-3.82.19.71.30.98.4 a)Govt. Final Consumption Expenditure12.118.653.973.375.959.325.938.222.96.940.112.9-3.4-4.4-5.5-7.01.3-9.617.36.632.3-9.7-14.2-6.42.815.011.7-4.1-0.719.32.7-2.27.411.918.418.43.57.13.512.122.012.914.017.6-0.4-15.11.016.7-2.05.50.3 b)Private Final Consumption Expenditure9.111.018.955.154.140.979.526.336.615.920.815.35.4-0.0-0.5-11.6-3.32.84.011.56.64.24.81.14.13.70.7-3.80.31.90.32.24.96.79.913.318.220.713.08.06.615.26.88.58.74.72.75.63.6-2.013.8 2-Gross Fixed Capital Formation14.639.258.383.9100.969.038.122.614.521.116.6-1.1-8.1-11.8-20.9-13.3-1.4-12.76.125.420.73.54.7-14.511.1-0.56.23.44.64.32.21.615.625.527.921.527.720.6-6.816.817.58.17.77.82.5-13.70.12.32.8-7.119.4 a)Private25.913.47.0-13.612.0-0.23.67.94.71.61.51.313.524.617.525.823.817.6-9.66.78.74.912.29.02.7-5.24.32.47.4-7.70.0 b)Public6.4-28.6-7.0-20.25.0-2.224.7-22.84.226.27.13.528.530.580.86.943.130.72.043.835.213.31.15.92.2-28.3-9.52.1-9.5-5.20.0 3-Domestic Final Demand11.019.037.968.775.356.547.028.025.015.124.49.4-1.1-4.4-6.9-10.6-1.5-4.28.412.417.3-0.8-1.2-4.55.25.85.0-2.41.07.61.50.68.112.817.417.316.316.83.811.814.112.29.111.04.0-6.71.57.71.7-1.211.1 4-Exports of Goods & Services41.641.7123.983.718.911.811.3-10.453.268.412.7-31.9-35.6-15.2-22.2-24.015.24.516.447.56.85.8-14.80.616.418.62.3-33.028.946.7-11.36.427.533.341.920.310.629.6-37.429.643.76.2-2.9-8.5-38.5-7.919.531.2-9.2-35.657.4 5-Imports of Goods & Services10.726.758.383.768.053.255.433.313.416.125.59.53.5-10.4-27.7-16.43.4-2.416.91.730.42.5-9.8-20.812.76.42.2-10.0-3.525.2-6.11.815.420.531.138.728.121.7-8.37.513.68.76.811.1-3.2-19.92.03.84.5-16.811.4 Gross Domestic Product33.224.338.3191.02.137.315.74.337.845.613.9-15.7-15.0-5.5-10.7-14.4-0.33.08.023.412.43.7-3.01.76.010.74.6-11.410.217.2-2.83.013.819.926.814.710.425.0-17.423.127.19.61.51.3-13.5-1.46.818.6-1.6-12.518.5 shares Expenditure on Gross Domestic Product at Current Prices (Million Of Saudi Riyals) 1970197119721973197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021* 1-Gross Final Consumption Expenditure11,70412,88514,63119,18031,17351,00676,267116,487152,789199,644224,071287,469328,508334,080328,275320,315288,607284,193278,267303,100331,955386,717379,474368,725363,029376,203404,269423,223406,610406,311440,899446,557447,957474,483516,652586,804678,442756,273869,045948,8291,039,5901,169,8231,336,5831,467,2571,649,0131,724,9461,660,0891,694,6221,859,5111,884,5371,901,3202,060,917 a)Govt. Final Consumption Expenditure3,8374,3005,0987,84413,59323,90838,07647,92166,21781,40486,981121,864137,555132,834127,048120,051111,633113,040102,240119,958127,824169,128152,692130,976122,552125,923144,783161,795155,192154,095183,804188,695184,517198,148221,798262,650311,082322,086345,098357,015400,173488,062551,179628,522739,156736,139624,632630,978736,234721,283761,122763,741 b)Private Final Consumption Expenditure7,8678,5859,53311,33617,57927,09838,19068,56786,572118,240137,089165,605190,952201,245201,226200,264176,974171,154176,027183,142204,131217,589226,782237,749240,477250,280259,486261,428251,418252,216257,095257,862263,440276,335294,854324,154367,360434,187523,947591,814639,417681,761785,404838,735909,857988,8071,035,4571,063,6441,123,2771,163,2541,140,1981,297,176 2-Gross Fixed Capital Formation3,0693,5154,8927,74514,24228,61748,35866,76781,83693,680113,438132,262130,767120,238106,05083,87372,69571,66062,55666,39283,251100,480103,955108,82493,002103,316102,848109,241112,959118,196123,324126,095128,066148,098185,872237,691288,680368,687444,499414,452483,921568,793614,906662,455714,253732,432631,838632,232646,871664,690617,582737,658 a)Private60,94676,75387,00693,06180,42090,10589,93493,139100,522105,238106,971108,587109,945124,807155,486182,751229,939284,645334,617302,364322,730350,849367,975412,777449,791462,083437,971456,722467,682502,458463,707637,985 b)Public22,30523,72716,94915,76312,58213,21112,91416,10212,43712,95816,35317,50818,12123,29130,38654,94058,74184,042109,882112,088161,191217,944246,931249,678264,462270,349193,867175,510179,188162,232153,87599,673 3-Domestic Final Demand14,77216,40019,52326,92545,41579,623124,625183,255234,625293,324337,509419,731459,274454,318434,325404,188361,302355,853340,822369,493415,206487,198483,429477,549456,032479,519507,117532,464519,569524,507564,223572,652576,023622,581702,525824,495967,1221,124,9601,313,5441,363,2811,523,5111,738,6161,951,4882,129,7122,363,2662,457,3782,291,9272,326,8552,506,3812,549,2272,518,9032,798,575 4-Change in Stock2,3514,2103,183-15,17235,623821,15613,25417,1835,12411,964-3635,05033,06432,342-3,141-10,032-14,7972,5183,039-14,158-1,51613,93915,94110,0515,5847,5017,46813,35612,27113,9589,40611,9589,6516,87110,61524,88543,98087,56195,884128,660110,103117,61678,678101,204105,996116,270112,777160,812213,387111,0981,441 5- Exports of Goods & Services12,29317,40324,66855,240101,463120,656134,953150,167134,571206,226347,345391,591266,511171,681145,530113,16385,98999,045103,531120,494177,685189,694200,772171,065172,123200,437237,812243,384163,099210,231308,473273,677291,155371,088494,702702,164844,522934,3211,210,701757,711981,8671,410,8411,497,8241,453,6651,329,530817,539753,225899,9751,180,9371,071,975690,6081,086,807 6- Imports of Goods & Services5,2185,7767,31911,58821,28435,75754,79485,154113,508128,736149,437187,591205,502212,775190,639137,892115,239119,170116,352135,961138,207180,199184,746166,590131,976148,720158,239161,782145,616140,570175,973165,219168,114194,041233,814306,503425,038544,434662,568607,759653,261742,414807,023862,128957,686927,402742,913757,409785,960821,028682,979761,044 Gross Domestic Product24,19832,23740,05655,404161,216164,530225,940261,521272,871375,938547,381623,367525,334446,288421,558376,318322,020320,931330,519357,065440,526495,177513,394497,965506,230536,820594,191621,534550,408606,439710,681690,516711,022809,279970,2831,230,7711,411,4911,558,8271,949,2381,609,1171,980,7772,517,1462,759,9062,799,9272,836,3142,453,5122,418,5092,582,1983,062,1703,013,5612,637,6293,125,780 * Preliminary Data Shares of GDP C G I X M Production Function Calculation Production function calculations Equation:Y = A*K^alpha*L^(1-alpha) Problem 1: given inputs and productivity, find output A =2 K =5 L =10 alpha =0.3333333333 Answer: Y = Problem 2: given inputs and output, find productivity Y =10 K =20 L =5 alpha =0.3333333333 Answer: A = Solow Model Solow model simulations Idea: each date is connected to the previous one Inputs (from Penn World Table) Y0 =4.0790(initial GDP) A0 =3.4299(initial TFP) K0 =8.2330(initial capital) L0 =0.4520(initial labor) alpha =0.3333(capital share in production function) s =0.2500(saving/investment rate) delta =0.0600(deprec rate) a =0.0000(TFP growth rate) n =0.0000(labor growth rate) Simulation DateTFPCapitalLaborGDPSav=InvDeprec 20103.438.230.4524.081.020.49 20113.438.760.4524.161.040.53 20123.439.270.4524.241.060.56 20133.439.780.4524.321.080.59 20143.4310.270.4524.391.100.62 20153.4310.750.4524.461.110.65 20163.4311.220.4524.521.130.67 20173.4311.680.4524.581.150.70 20183.4312.130.4524.641.160.73 20193.4312.560.4524.701.170.75 20203.4312.980.4524.751.190.78 20213.4313.390.4524.801.200.80 20223.4313.780.4524.841.210.83 20233.4314.170.4524.891.220.85 20243.4314.540.4524.931.230.87 20253.4314.900.4524.971.240.89 20263.4315.250.4525.011.250.91 20273.4315.580.4525.051.260.94 20283.4315.910.4525.081.270.95 20293.4316.230.4525.111.280.97 20303.4316.530.4525.151.290.99 20313