1. Southwest Asia (Middle East)
Lesson 8:
Economic Understandings in the Middle East

2. Draw the “Economics Web”
Activate!
You have 60 Seconds to…….
Draw the “Economics Web”

3. STANDARD(S):
SS7E6: The student will explain how voluntary trade benefits buyers and sellers in Southwest Asia (Middle East)
Explain how specialization encourages trade between countries
B. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos.
C. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC)
D. Explain why international trade requires a system for exchanging currencies between nations.

4. STANDARD(S):
SS7E7 The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran.
Explain the relationship between investment in human capital and GDP.
Explain the relationship between investment in capital and GDP.
Explain the role of oil in these countries’ economies
Describe the role of entrepreneurship

5. Translation You need to know… Israel, Saudi Arabia, and Iran
(How they invest in their economy/their role in OPEC)

6. Essential Question
How do “economic factors” influence the Middle East?

7. Specialization NO country produces everything it needs.
Specialization encourages trade between countries
Both parties benefit!
Example:
Middle East – Oil
U.S. – food, medicine, raw materials
IT’S ALL GOOD! Right?

8. TRADE BARRIERS
Too much of a good thing can be BAD! You have to protect DOMESTIC PRODUCERS!
Tariffs (tax on imports): higher price on imports = lower demand on imports = higher demand on domestic goods
Quotas (limit on imports): “supply shortage” = higher price on imports = higher demand on domestic goods
Embargoes – NO trade at all!

9. Examples: Embargoes: Tariffs: U.S. & Iran – terrorism
U.N. & Iraq – invasion of Kuwait
U.N. & Afghanistan – 9/11 (weapons)
Saudi Arabia & Israel – cancelled to join WTO
Tariffs:
Saudi Arabia & Egypt – food shortages resulted in lifting tariffs

10. Think about it…..
Agree/Disagree & Explain: There should be a O.C.W.O – Organization of Countries Without Oil – to control the BUYING of oil. If all countries without oil would ban together and stop buying (boycott) oil, the prices would DROP! This would work! Right?

11. “You down with OPEC?”
1960 – Organization of Petroleum Exporting Countries (Iran, Iraq, Saudi Arabia, Kuwait, Venezuela)
Purpose: Control oil prices
Result: POWER

12. “You gotta have money….honey!”
Currency: type of money a country uses
Many countries, many types
Foreign Exchange – process of converting your money to buy goods in a foreign country
NECESSARY TO DO BUSINESS!!!!
Examples:
1 Turkish lira = $0.80
1 Afghan afghani = $0.02

13. Field of Dreams: “If you build it, they will come!”
Who is they? Buyers and sellers!
Build what? A good economy!
How? Management of “Productive Resources”
---How can these benefit a country’s economy?
Human Capital
Capital
Natural Resources
Entrepreneurship

14. Good, bad, or ugly? GDP – Gross Domestic Product
Provides a “Health Assessment” & used for comparison
Studies have shown….investment in human capital and capital results correlates to higher GDP
If you fail to plan, you plan to fail!
Israel, Saudi Arabia, Iran – Do they have a plan?

15. Israel Growing steady (5% a year) Invested in HC
Highly educated work force
97% literacy rate – highest in ME!
Capital – Foreign investments – technology
Modern infrastructure, continuously improving
Very healthy economy – even without OIL!

16. Saudi Arabia GDP is growing, but….
Anchored by oil, & won’t last forever= PROBLEM
Flaws: High unemployment, large # of foreign workers fill open jobs
Investing in HC – sends students to college abroad, revamping its education system
Investing in Capital – bad roads, multi-billion dollar rail system, factories

17. Iran Oil – 85% of government revenues!
Investing slowly in Capital: telecommunications, roads, and machinery
They got 99 problems, but OIL ain’t one! (aka: lots of flaws)
Unemployment
Weak educational system (students are moving to other countries for an education)
Educated Iranians leave
Stifling government control
Poor facilities for oil
* They’re trying to fix their problems.

18. Entrepreneurs Vital to economic growth! Why?
New ideas = newer, better products
Israel – positive environment (entrepreneurship is encouraged)
Saudi Arabia – making reforms
Iran – small, many obstacles

19. Summarize! Pick one: Agree/Disagree & Explain:
If all OIL supplies suddenly disappeared, the economies of the countries of the Middle East would collapse.