Transcript Economy of the Middle East

SS7E5, SS7E6, SS7E7
 SS7E5. C. Compare and contrast the
economic systems in Israel, Saudi
Arabia, and Turkey.
 Has almost no natural resources or farmland
 Developed good relations with much of
Western Europe and the United States
 Economy based on advanced technology
 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
 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
 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
The economies of Israel, Saudi Arabia, and Turkey
could best be described as….market, command,
mixed, or traditional?
2. How have the Israelis made up for their lack of
natural resources?
3. Which industry does the gov’t of Saudi Arabia
heavily control?
4. How has the king of Saudi Arabia used the profits
from oil to help other areas of his kingdom?
1.
 SS7E6.a. Explain how specialization
encourages trade b/w countries
 Not every country can produce the goods and services
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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.
1. What is “economic specialization”?
2. Saudi Arabia specializes in the production
of?
3. Israel specializes in?
 B. Compare and contrast different types
of trade barriers such as tariffs, quotas,
and embargos
 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
 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
 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
 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
1. What is a tariff?
2. What is a quota?
3. What is an embargo?
c. Explain the primary function of the
Organization of Petroleum Exporting
Countries (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
1. Why was OPEC created?
2. What happens to the price of oil when
OPEC countries decide to limit the
production?
3. Where are most of the OPEC countries
located?
4. How does the principle of supply and
demand work?
 A. Explain the relationship b/w
investment in human capital and gross
domestic product
 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
 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.
 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
 Main industry is as an exporter of oil and petroleum
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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
 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.
 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?
B. Explain the relationship between
investment in capital and GDP
 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
 Invested heavily in capital goods
 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
 What are capital goods?
 Iran has invested in capital goods related to
what?
 What has Saudi Arabia invested into?
 Israel has invested into technology used for
what?
 C. Explain the role of oil in these
countries’ economies.
 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
 Israel
 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
 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?
 D. Describe the role of
entrepreneurship
 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
 1. What is an entrepreneur?
 2. What are they willing to risk in order to produce
new goods?
 3. What percentage of most new businesses are still
open after three years?
 4. What is the risk involved in being an entrepreneur?
 5. Why do you think that entrepreneurs are a necessary
in order to have a strong economy?