Transcript SOUTHWEST ASIA (Middle East)

SOUTHWEST ASIA (Middle East)
Economic Understandings
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
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
– At least some free market and free enterprise as
well as some government planning and control
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.
• 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.
• 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.
• Turkey
– Seen as gateway to Asia from
Europe
– Least economic freedom of the
countries…government control
– Government has been loosening control of key
businesses
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.
• 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.
• 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.
• 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 – 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
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
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
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.
• Entrepreneurs: 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