SOUTHWEST ASIA (Middle East) Economic Understandings

Traditional Economy Decisions based on custom and past decisions SS7E5 – a. Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce. Traditional Economy Decisions based on custom and past decisions Tradition means things that have been passed down from one generation to the next Typical in farming, herding, simple crafts and trades Very little money ever exchanges hands

SS7E5 – a. Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce. Command Economy Centralized economy where government makes most decisions Government decides for the what, how, who

Market Economy Society’s economic decisions are made by individuals SS7E5 – a. Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce. Market Economy Society’s economic decisions are made by individuals A.K.A.: capitalism, free enterprise, or laissez-faire Laissez-faire: to allow them to do as they please

SS7E5 – b. Explain how most countries have a mixed economy located on a continuum between pure market and pure command. Mixed Economy Nearly all modern economies have both market and command systems Atleast some free market and free enterprise as well as some government planning and control

Israel Don’t get along with most of their neighbors SS7E5 c. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey and Iran. Israel Don’t get along with most of their neighbors Good relations with Western Europe and U.S. Almost no natural resources Built economy on technology to make up for lack of resources

SS7E5 c. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey and Iran. Much is desert, but the country has rich oil reserve to buy what they don’t have King and his advisors decide how to spend oil money Most money has been put back into technology

Iran Great oil wealth Becoming more mixed economy SS7E5 c. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey and Iran. Iran Great oil wealth Becoming more mixed economy because command economy hasn’t been very efficient

Turkey Seen as gateway to Asia from Europe SS7E5 c. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey and Iran. Turkey Seen as gateway to Asia from Europe Least economic freedom of the countries…government control Government has been loosening control of key businesses

Not all countries can produce all they need SS7E6 – a. Explain how specialization encourages trade between countries. Not all countries can produce all they need They specialize in what they can produce most efficiently Look for other countries to can trade or sell what they need for what they have Southwest Asia is rich in oil and natural gas, but lack farmland Money earned from oil allows these countries to buy food, advance technology, etc.

SS7E6 – b. Compare and contrast different types of barriers such as tariffs, quotas, and embargoes. Trade Barriers Anything that slows down or prevents one country from exchanging goods with another Made to protect local industries Also created due to political problems between countries

SS7E6 – b. Compare and contrast different types of barriers such as tariffs, quotas, and embargoes. Tax placed on goods when they are brought (imported) into one country from another country Purpose is to make imported good more expensive to protect local industry

SS7E6 – b. Compare and contrast different types of barriers such as tariffs, quotas, and embargoes. Sets a specific amount or number of a particular product that can be imported or acquired in a given period Example: only 1500 cars can come from Japan in a given year Again, to protect local industry

SS7E6 – b. Compare and contrast different types of barriers such as tariffs, quotas, and embargoes. One country announces that it will no longer trade with another country in order to isolate the country and cause problems with that country’s economy Usually when 2 countries are having political disputes

SS7E6 – c. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC). Created in 1960 by countries with large oil supplies to work together to regulate the supply and price of exported oil More they produce the less it costs Less they produce the more it costs

Currency: type of money used in a country SS7E6 – d. Explain why international trade requires a system for exchanging currencies between nations. Currency: type of money used in a country Exchange rate: system of changing from one type of currency to another in order for countries with different currency to trade In order for them to trade with each other, they have to be able to figure out what goods cost in each currency

SS7E7 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). Human capital: knowledge and skills that make it possible for workers to earn a living producing goods or services Gross Domestic Product (GDP): determined by taking the total value of all goods and services produced by a country in a single year

Human Capital Education leads to more profitable SS7E7 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). Human Capital Education leads to more profitable business, satisfied workers, higher production, which all lead to higher GDP Israel Wide access to education Medical technology, agricultural technology, mining, and electronics require education

SS7E7 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). Saudi Arabia Oil industry requires well-trained and educated labor force Modern communications and transportation systems both require investments in human capital

Iran 5th largest producer of oil SS7E7 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). Iran 5th largest producer of oil Oil wealth led to use of advanced technology that requires highly trained workers

SS7E7 – b. Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP). Capital goods: factories, machines, and technology that people use to make other goods are important to economic growth increases production and leads to higher profit which leads to higher GDP

SS7E7 – b. Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP). Israel Invested heavily in capital goods because economy is dependent on technology and industrial production Spends great deal on defense industry as well.

SS7E7 – b. Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP). Saudi Arabia Invested heavily in capital goods, especially those related to oil production, transportation, and communication

SS7E7 – b. Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP). Iran Made great investments in capital goods related to oil production, technology, and communication. Spends great deal on defense industry as well.

SS7E7 – c. Explain the role of oil in these countries’ economies. Natural resources: raw materials a country has that make life and production of goods possible. Examples: land, water, forests, rich soil, and minerals

SS7E7 – c. Explain the role of oil in these countries’ economies. Israel Practically no oil With no oil and an industrialized economy, oil and natural gas prices are very important to their economy

SS7E7 – c. Explain the role of oil in these countries’ economies. Saudi Arabia Few natural resources, but lots of oil Wealth comes from oil and natural gas Wealth enables them to modernize agriculture through irrigation and desalinization Wealth also modernized roads, schools, airports, and communications systems

SS7E7 – c. Explain the role of oil in these countries’ economies. Iran Oil is most valuable natural resource Rich farmland and access to water for irrigation and farming Oil and petroleum are largest producer of wealth 85% of wealth

SS7E7 – d. Describe the role of entrepreneurship. Entrpreneurs: creative, original thinkers who are willing to take risks to create new businesses and products Only 50% of all new businesses are operating 3 years after they begin