1. SOUTHWEST ASIA (Middle East) Economic Understandings

2. 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.

3. Command Economy – Centralized economy where government makes most decisions – Government decides for the what, how, who 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.

4. 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 – 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.

5. 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 – At least some free market and free enterprise as well as some government planning and control

6. Quiz 1 1.Traditional economies are based on _______. 2. Mixed economies are based on __________ and _________. 3. Command economies are based on _______.

7. SS7E5 c. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey and Iran. Israel – Doesn’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

8. Saudi Arabia – 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 SS7E5 c. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey and Iran.

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

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

11. Quiz 1 Continued 4. Israel’s economy is based mainly on ___________ because they have almost no natural ___________. 5. ______ ______’s economy is based mainly on oil. 6. Iran is becoming more of a _______ economy because a _________ economy has not worked well. 7. ________ is seen as gateway to Asia from Europe. 8. The country of _______ has the most economic freedoms. 9. Whereas _________ has the least economic freedoms. 10. Saudi Arabia is a mainly ___________ climate.

12. 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 that can trade or sell what they have for what you need 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.

13. 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

14. Tariff – 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.

15. Quota – 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.

16. Embargo – 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 – b. Compare and contrast different types of barriers such as tariffs, quotas, and embargoes.

17. Quiz 2 1.A ______ is a limit on the amount of imported goods allowed into a country. 2.An _______ is a ban on trade. 3.A ______ is a ____ placed on goods imported from other countries to protect local businesses. 4. A ______ ______ is anything that slows down or prevents one country from exchanging goods with another country. 5. When a country makes and sells a product they do best and then buys other products they need, this is known as _________________________.

18. SS7E6 – c. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC). 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

19. 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

20. 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

21. 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).

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

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

24. 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

25. – 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).

26. – 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).

27. – Iran Made great investments in capital goods related to oil production, technology, and communication. 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).

28. Quiz 2 continued 6.Explain the difference between capitals goods and human capital. 7.Explain the relationship between the investment in human capital and the GDP. 8. How does investment in capital goods affect a country’s GDP? 9.Iran and Saudi Arabia invest money mainly in the production of ____________. 10.Israel invests money mainly in ______ and on a strong national __________.

29. 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

30. – 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.

31. – 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.

32. – 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 – c. Explain the role of oil in these countries’ economies.

33. 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

34. Constructed Response How has the abundance or lack of natural resources and minerals affected the economies of Israel, Iran and Saudi Arabia?