SS7E5, SS7E6, SS7E7

SS7E5. C. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey, and Iran

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

1. The economies of Israel, Saudi Arabia, Turkey, and Iran 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?

SS7E6.a. Explain how specialization encourages trade b/w countries

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.

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?

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 educationEconomy 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 industriesGDP very high b/c of its investment in

human capital

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 projectsThese economic factors require investment in

human capitalSaudi Arabia has a high GDPSome citizens still practice traditional economic

activities like farming and herding

World’s fifth largest producer of oilOil industry requires well-trained and

educated workersHave 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

IranHas made great investments in capital goods related

to oil production, technology and communicationAlso spends a great amount on technology for its

defense industry

What are capital goods?Israel has invested heavily in capital

goods in all of the following areas EXCEPT…..

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