1. Economy of the Middle East
SS7E5, SS7E6, SS7E7

2. SS7E5 The student will analyze different economic systems.
SS7E5. C. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey, and Iran

3. Israel Has almost no natural resources or farmland
Developed good relations with much of Western Europe and the United States
Economy based on advanced technology

4. Saudi Arabia Rich oil reserves
Profit from oil allows them to buy most goods they are unable to produce themselves
King and his advisors make most decisions about how and where to spend the oil profits
Invested much wealth in technology and services which allows them to produce goods not usually found in a desert climate

5. Iran
Great oil wealth
Command economy has not been efficient in recent times
Shift to a more mixed economy
Despite the oil wealth, the Iranian people do not share in the money

6. Turkey Least economic freedom of these four countries
In earlier times, the gov’t has controlled airlines, railroads, telephone, and television
Recently the gov’t has loosened its hold on these industries
Have allowed some private ownership
More laws have been passed to protect business owners

7. Summary Questions:
The economies of Israel, Saudi Arabia, Turkey, and Iran could best be described as….market, command, mixed, or traditional?
How have the Israelis made up for their lack of natural resources?
Which industry does the gov’t of Saudi Arabia heavily control?
How has the king of Saudi Arabia used the profits from oil to help other areas of his kingdom?

8. SS7E6. The student will explain how voluntary trade benefits buyers and sellers in the Middle East
SS7E6.a. Explain how specialization encourages trade b/w countries

9. Specialization
Not every country can produce the goods and services it needs
So they “specialize” in producing a good or service that they can produce most efficiently
They can then trade that product for goods and services they need
Way to build a profitable economy and earn money to buy what it needs
Saudi Arabia specializes in the production of oil and gas.
Israel specializes in agricultural technology even though they have a limited supply of farm land.

10. Summary Questions: What is “economic specialization”?
Saudi Arabia specializes in the production of?
Israel specializes in?

11. SS7E6. The student will explain how voluntary trade benefits buyers and sellers in the Middle East
B. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos

12. Trade Barriers
Anything that slows down or prevents one country from exchanging goods with another
Some protect local industries from lower priced goods made in other countries (keeps competition away)
Some created due to political problems between countries

13. Tariff
Tax placed on goods when they are imported into one country from another
Purpose is to make the imported good more expensive than the similar item created locally
“protective tariff”-protects local manufacturers from competition

14. Quota
Different way of limiting the amount of foreign goods than can come into a country
Sets a specific amount of particular goods that can be imported in a certain time frame

15. Embargo
When 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 result of a political dispute
1973-OPEC decided to stop all sales of oil and gas to countries supporting Israel in the 1973 Arab-Israeli war

16. Summary Questions: What is a tariff? What is a quota?
What is an embargo?

17. SS7E6. The student will explain how voluntary trade benefits buyers and sellers in the Middle East
c. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC)

18. OPEC Created in 1960 by countries with large oil supplies
Countries wanted to work together to regulate the supply and price of oil exported to other countries
First five countries: Kuwait, Iraq, Saudi Arabia, Iran and Venezuela
Continue to decide how much oil they will produce and that determines the price on the world market
Basic principles of supply and demand

19. Summary Questions: Why was OPEC created?
What happens to the price of oil when OPEC countries decide to limit the production?
Where are most of the OPEC countries located?

20. SS7E7. The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran
A. Explain the relationship b/w investment in human capital and gross domestic product

21. Human Capital
The knowledge and skills that make it possible for workers to earn a living producing goods and services.
Companies that invest in human capital generally earn higher profits.
Countries that invest in human capital generally have higher production levels of goods and services.
This can lead to a higher gross domestic product than countries that do not invest in human capital

22. Gross Domestic Product (GDP)
Determined by taking the total value of all goods and services produced by a country in a single year.
Wealthy countries generally have a much higher GDP than developing or underdeveloped countries.
Countries in SW Asia have widely different GDP levels
Countries that make it possible for workers to have education and training generally have higher GDPs.

23. Israel Much access to education
Economy depends on technology industries to make up for country’s lack of natural resources
Many citizens work in industries related to medical technology, agricultural tech., mining and electronics
Highly developed service industries
GDP very high b/c of its investment in human capital

24. Saudi Arabia
Main industry is as an exporter of oil and petroleum products.
Technology involved in oil industry requires education and much training.
Also have modern communications and transportation systems
Enormous building projects
These economic factors require investment in human capital
Saudi Arabia has a high GDP
Some citizens still practice traditional economic activities like farming and herding

25. Iran World’s fifth largest producer of oil
Oil industry requires well-trained and educated workers
Have well respected schools and universities
However, in recent years, Iranian government has not done a good job of regulating the parts of the economy that are under gov’t control.

26. Summary Questions
Why have the Israelis made a big investment in human capital?
Why would the Saudi oil industry need a large investment in human capital?
One of Iran’s biggest problems with their state-run oil industry is::
If a country does not invest in its human capital, how can it affect the country’s GDP?

27. SS7E7. The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran
B. Explain the relationship between investment in capital and GDP

28. Capital goods
Factories, machines, and technology that people use to make other goods
Can increase production, which can increase profit which can increase GDP
Israel
Invested heavily in capital goods
Also invested heavily in technology used in defense industry
Saudi Arabia
Especially in technology needed in oil, transportation, and communication
Iran
Has made great investments in capital goods related to oil production, technology and communication
Also spends a great amount on technology for its defense industry

29. Summary Questions What are capital goods?
Israel has invested heavily in capital goods in all of the following areas EXCEPT…..

30. SS7E7. The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran
C. Explain the role of oil in these countries’ economies.

31. Oil One of most important and valuable resources in the Middle East
Most of the worlds’ industrial nations depend on a steady supply of oil and gas
U.S. imports nearly half of all the oil it uses, almost 18 million barrels every day
Over half of the world’s known supplies of oil come from countries in the Middle East

32. Oil Israel Saudi Arabia Iran Has practically no oil at all
Economy depends more on technology than natural resources
Saudi Arabia
Has very few natural resources other than oil
Very influential in world economy and OPEC
The gov’t has modernized roads, schools, airports, and communication systems
Iran
Most valuable resource is oil
85% of country’s money comes from the sale of oil and petrochemicals
1/3 of population works in agricultural areas
Political problems have led to economic difficulties
Member of OPEC, therefore benefits by keeping the price of oil high in the world market

33. Summary Questions Why are oil and gas such valuable natural resources?
How much of the oil used by the U.S. has to be imported every day?
How has the Saudi gov’t used its national wealth to change the country?
How do Iran and Saudi Arabia benefit from belonging to OPEC?
How has Israel’s lack of oil affected that country’s economy?

34. D. Describe the role of entrepreneurship
SS7E7. The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran
D. Describe the role of entrepreneurship

35. Entrepreneurs
Creative, original thinkers who are willing to take risks to create new businesses and products.
Willing to risk their own money (usually) to produce new goods and services in the hope that they will earn a profit.
Only about 50% of all new businesses are still operating after three years
Important asset to a strong economy