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SS7E5 The student will analyze different economic systems. 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. c. Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey. SS7E6 a. 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). 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 between investment in human capital (education and training) and gross domestic product (GDP). c. Explain the role of oil in these countries’ economies. d. Describe the role of entrepreneurship. Traditional Market Command Mixed •Exchange is often based on customs and how things have been done before. •Bartering or trading goods is more common than using money •Subsistence farming, or just making enough to feed your family, is common. •Government makes important decisions for people •Has high regulations •Government decides who work where and what they do. Government •People decide what to produce and what to buy. •Has NO government regulations •Entrepreneurs, or people who are willing to take risks in business, are more successful in Market or mixed economies •No true Market Economies Exist today •People decide what to produce and what to buy. •Has some government regulations on what people can do in business •Almost all countries operate on a continuum between Market and Command •Entrepreneurs are highly successful in Market Economies OPEC • OPEC or Organization of Petroleum (Oil) Exporting Countries is extremely important in the Middle East. • OPEC regulates the price of oil on the world market. • Persian Gulf Countries have high volume of oil. • Saudi Arabia, Iraq, Iran, and Kuwait have the worlds largest deposits of oil. • Countries in OPEC have specialized in oil drilling and refining. • Specialization is when person or country produces some goods very effectively and concentrates on producing those goods. Trade Barriers Definitions Tariff Taxes on goods being imported Quota Limit on amount of foreign goods being imported Embargo Formal halt to tradeusually because of political or economic reasons System to change one currency to another Exchange rate Visual •Iran is a leading member in OPEC, because it has a lot of oil •85% of the economy comes from oil •Iran is a mixed economy that is very much like command economy •Their economy struggles because of too much government influence and sanctions (trade restrictions) from Western Nations •Iran also has rich farm land and 1/3 of the population farms •Israel has LITTLE oil and few natural resources •Israel has specialized in technology and business which help make their economy successful. •Israel has highly advanced agricultural technology, which is important in the Arid region •It has spent much money to have a high literacy rate and more human capital •Normally countries with a high literacy rate have a high GDP •Tourism also helps the economy •Saudi Arabia is the most Oil rich country in the world and a leading member of OPEC •Saudi Arabia Specializes in Oil production •Tourism also helps the economy Saudi Arabia is where the Hajj is and about 12 million Muslims visit Mecca a year. •Millions of other tourists also visit Saudi Arabia •Turkey has important technology, agricultural and industrial sectors •Turkey is a leader for many Middle Eastern nations as a successful mixed economy with growing business diversifications •Tourism also helps the economy Millions of tourists visit yearly