1. SOUTHWEST ASIA (Middle East)
Economic Understandings

2. 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

3. 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

4. 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

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
Atleast some free market and free enterprise as well as some government planning and control

6. 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

7. 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

8. 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

9. 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

10. 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.

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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.

23. 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

24. 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.

25. 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

26. 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

27. 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

28. 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

29. 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