Middle eastern economies
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Middle Eastern Economies. See if you can tell which country or countries our government favors by the way each country is presented. GPS and E.Q.

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Middle Eastern Economies

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Middle eastern economies

Middle Eastern Economies


Middle eastern economies

  • See if you can tell which country or countries our government favors by the way each country is presented.


Gps and e q

GPS and E.Q.

  • GPS: SS7E5a. 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.

  • E.Q. How do traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce?


Vocabulary

Vocabulary

  • Tradition – something that has been passed down in a culture from one generation to the next.

  • Bartering – trading in goods and services

  • Economic Specialization – producing goods a country can make most efficiently so they can trade them for goods made by others that cannot be produced locally.

  • tariff: - tax on imports

  • Quota – limit on number or amount of imported goods

  • Embargo – government order halting trade with another country

  • Entrepreneur – someone who is willing to take a risk to start a new business or product


Vocabulary1

Vocabulary

  • Human capital – education and training

  • Capital goods – factories, machinery, and technology

  • GDP – total value of all goods and services produced in a country in a year

  • GDP per capita – the GDP divided by a country’s population

  • Market economy – also called capitalism, free enterprise, and laissez-faire


Vocabulary2

Vocabulary

  • Traditional – an economic system in which most economic decisions are based on custom and habit

  • Command – an economic system in which government planning groups make economic decisions

  • Market – an economic system in which economic decisions are made by individuals who decide what to produce and what to buy


Economics review

Economics Review

  • How many basic types of economic systems are there?

  • 3

  • Name the economic systems:

  • Traditional, Command, Market

  • Which system are most countries in the world?

  • Mixed – not a system, but a blending of command and market.


Traditional

Traditional

  • Most economic decisions are based on custom and habit.

  • Found in rural areas where people depend on their extended families

    • Work is often subsistence farming, herding animals, or working in simple crafts and trades.

    • Little money ever changes hands in a traditional society.

    • Bartering is how people usually pay for goods and services.

  • No country today has a traditional economy – but some areas of SW Asia still practice it (Bedouin, for example)


Crct test prep page 107

CRCT Test Prep page 107

313. In a traditional economy, how are economic decisions made?

A. custom and habit

B. government planners

C. consumers and the market

D. combination of consumers and government planners

A. Custom and habit


Command

Command

  • More centralized economy – government planning groups make most basic economic decisions

    • Which goods & services should be produced

    • Prices for goods and wages paid to workers

    • What jobs workers do

    • How & where goods would be sold

  • No individuals can start their own businesses

  • Government owns the places where goods are made


Crct test prep page 1071

CRCT Test Prep page 107

314. In a command economy, how are economic decisions made?

A. custom and habit

B. government planners

C. consumers and the market

D. combination of consumers and government planners

D. combination of consumers and government planners


Market

Market

  • Economic decisions are made by individuals who decide what to produce and what to buy

  • Also called capitalism, free enterprise, and laissez-faire (French – means “to allow them to do as they please”)

  • Many SW Asian countries use a market system.


Crct test prep page 108

CRCT Test Prep page 108

316. In a market economy, how are economic decisions made?

A. farmers

B. custom and habit

C. government planners

D. consumers and the market

D. Consumers and the market


Crct test prep page 1081

CRCT Test Prep page 108

317. Who takes on the financial risk in starting a new business in a market economy?

A. consumers

B. government planners

C. individual business people

D. combination of government planners and individual investors

C. Individual business people


Gps and e q1

GPS and E.Q.

  • GPS: SS7E5b.: Explain how most countries have a mixed economy located on a continuum between pure market and pure command.

  • E.Q. How do most countries have a mixed economy located on a continuum between pure market and pure command?


Mixed

Mixed

  • Blend of command and market economy characteristics

  • Most SW Asian countries have a mixed economy.


Economic systems

Economic Systems

Pure

Command

Mixed Economy

Pure

Market


Crct test prep page 1082

CRCT Test Prep page 108

318. Why are most modern economies referred to as mixed?

A. Poverty is always highest in countries with market economies.

B. Government planners do not know how to handle economic problems.

C. Products made by traditional economies have no markets in the modern world.

D. Most countries have aspects of all 3 economic types at work in their economies.

D. Most countries have aspects of all 3 economic types at work in their economies.


Crct test prep page 109

CRCT Test Prep page 109

319. Why do most countries today operate somewhere between a market economy and a command economy?

A. Most consumers want government control of the economy.

B. Government control makes a market economy more profitable.

C. Government control of some aspects of the economy has never been successful in the modern world.

D. Most economies have found they need a mix of free market and some government control to be successful and protect consumers.

D. Most economies have found they need a mix of free market and some government control to be successful and protect consumers.


Gps and e q2

GPS and E.Q.

  • GPS: SS7E5c.: Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey.

  • E.Q. How do the economic systems in Israel, Saudi Arabia, and Turkey compare?


Israel

Israel

  • Small desert country along Mediterranean Sea

  • Lacks farmland and natural resources, so…

  • Economy is based on advanced technology


Middle eastern economies

Israel

(1) What to produce?

A large portion of Israel’s GDP comes from high tech manufacturing, financial services, and agriculture.


Middle eastern economies

(2) How to produce?

Israel has a lot of government ownership of business, but is gradually allowing individuals to own companies.


Middle eastern economies

(3) For whom to produce?

Israel’s private sector produces goods and services for domestic and international markets based on the market price system.


Middle eastern economies

Israel

67%

Economic Systems

U.S.

76%

Place on the continuum: Israel would fall in the middle of the market side on the continuum.

0

100

Pure

Market

Pure

Command


Turkey

Turkey

  • Northwestern part of the Middle East

  • Between Asia and Europe – has been a center of trade for 1000s of years

  • Has less economic freedom than Israel – government controls telephone and TV industries


Middle eastern economies

Turkey

(1) What to produce?

Turkey has an economy with many large service, manufacturing, and agricultural

sectors.


Middle eastern economies

(2) How to produce?

Since the late 1980s, Turkey has gradually moved from a government directed economy to more private enterprise.


Middle eastern economies

(3) For whom to produce?

1/5 of Turkey’s production is exported. The remainder is consumed by domestic

consumers and

the government.


Middle eastern economies

Economic Systems

Turkey

63%

Place on the continuum: Turkey would fall to the left of Israel on the market side of the continuum.

0

100

Pure

Market

Pure

Command


Saudi arabia

Saudi Arabia

  • Large desert country

  • Rich oil reserves allow Saudis to buy most of the goods they cannot produce themselves.


Middle eastern economies

Saudi Arabia

(1) What to produce?

Saudi Arabia is the world’s leading producer of oil. The Saudi government continues to invest in industrial production. It is a leader in petrochemicals, mining, and refining.


Middle eastern economies

(2) How to produce?

  • Over 95% of the oil industry in the country is operated by the government (the king). Most major industries are operated by the government.

  • 1/3 of Saudi Arabia’s workers come from other countries.

  • The government has used oil profits to invest intechnology development and services for the people.


3 for whom to produce

3) For whom to produce?

  • 1/3 of Saudi Arabia’s GDP is based on exports to other countries (This is due to the economy’s reliance on the oil sector).


Middle eastern economies

Economic Systems

Saudi Arabia

61%

Place on the continuum: Saudi Arabia would fall to the left of Turkey on the continuum.

0

100

Pure

Market

Pure

Command


Economic systems1

Economic Systems

Turkey

63%

0

100

Pure

Command

http://www.heritage.org/index/ranking

Mixed Economy

Pure

Market

Saudi Arabia

61%

Israel

67%


Crct test prep page 1091

CRCT Test Prep page 109

320. The economies of Israel, Saudi Arabia, Turkey, and Iran could best be described as

A. Mixed

B. Market

C. Command

D. Traditional

A. Mixed


Crct test prep page 110

CRCT Test Prep page 110

321. How have the Israelis made up for their lack of natural resources?

A. They have put everyone to work and have no unemployment.

B. They have relied primarily on farming to keep their country strong.

C. They have developed strong technology companies in their economy.

D. Israelis have refused to import oil, saving huge amounts of money each year.

C. They have developed strong technology companies in their economy.


Crct test prep page 1101

CRCT Test Prep page 110

322. Which industry does the government of Saudi Arabia heavily control?

A. oil

B. agriculture

C. technology

D. textile manufacturing

A. oil


Crct test prep page 1102

CRCT Test Prep page 110

323. How has the Saudi king used the profits from oil to help other areas in his kingdom?

A. Money is distributed directly to all Saudi citizens.

B. The king has ended unemployment in Saudi Arabia.

C. Oil profits have paid for modern technology and services.

D. The king has let the Saudi people decide how to invest oil profits.

C. Oil profits have paid for modern technology and services.


Specialization and trade

Specialization and Trade

GPS: SS7E6a.: Explain how specialization encourages trade between countries.

E.Q. : How does specialization encourage trade between countries?


Specialization do what you do best trade for the rest

Specialization“Do what you do best; trade for the rest!”

  • Countries specialize in producing the goods and services they can make most efficiently so they can trade them for goods made by others that cannot be produced locally.


Specialization

Specialization

  • In SW Asia, some countries are very rich in oil and natural gas.

  • They do not have farmland; it is hard to produce enough food.


Specialization1

Saudi Arabia

Specializes in production of oil and gas and sells these products at great profit on the world market.

They use the money to buy food and technology that will make their little bit of farming more efficient.

Israel

Does not have oil wealth

They have become leaders in agricultural technology – even though (or because) they have a limited supply of arable land.

They sell the technology to earn money to supplement the food they produce.

Specialization


Crct test prep page 111

CRCT Test Prep page 111

324. What is “economic specialization”?

A. directly swapping goods from one country to another without having to use money

B. trying to avoid investing in industry and technology because of the expense involved

C. producing all goods and services needed for a country’s growth, so that trade with other countries is not needed

D. producing goods a country can make most efficiently so they can trade them for goods made by others that cannot be produced locally.

D. producing goods a country can make most efficiently so they can trade them for goods made by others that cannot be produced locally.


Cr t test prep page 111

CR T Test Prep page 111

325. Saudi Arabia specializes in the production of

A. oil and gas.

B. oil and sugar.

C. olives and oranges.

D. beef and chicken.

A. Oil and gas


Cr t test prep page 1111

CR T Test Prep page 111

326. Israel specializes in

A. medical technologies.

B. industrial technologies.

C. scientific technologies.

D. agricultural technologies.

D. agricultural technologies.


Trade barriers

Trade Barriers

GPS : SS7E6b.: Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.


Middle eastern economies

E.Q.

  • How do barriers limit trade?


Barriers to trade

Barriers to Trade

  • A tariffis a tax placed on goods that one nation imports from another.

  • Many nations use tariffs to protect their industries from foreign competition.

  • Tariffs provide protection by acting to raise the price of imported goods.

  • Thus, tariffs encourage domestic firms to increase their production, and consumers are forced to pay higher prices for the protected goods.


Import quotas

Import quotas

  • Quotas set a limit on the amount of certain goods that can be imported into a country.

  • They tend to work better than protective tariffs, which do not always stop consumers who are willing to pay a higher price for an imported good.


Embargo

Embargo

  • An embargo is a government order stopping trade with another country.

  • Sometimes a government imposes an embargo to express its disapproval of actions taken by another government.

  • The embargo is intended to pressure the offending government to change its actions.

The U.S. is considering a full trade embargo against Iran – because of Iran’s nuclear program.


1973 opec oil embargo

1973 OPEC Oil Embargo

  • 1973 – Arab nations attacked Israel.

  • The U.S. supplied Israel with weapons to fight.

  • In response, OPEC had an oilembargo against the U.S. until 1974.

  • The result was an oil crisis.

    • Oil went from $3/barrel to $12/barrel (it’s $99 today!) Gas prices went from a quarter to a dollar.


Crct test prep page 112

CRCT Test Prep page 112

327. What is a tariff?

A. a tax paid by the purchaser when goods are sold

B. a tax placed on goods coming into one country from another

C. a tax placed on goods made by local craftsmen or manufacturers

D. a tax paid when goods are shipped from one state to another in the U.S.

B. a tax placed on goods coming into one country from another


Crct test prep page 1121

CRCT Test Prep page 112

328. What is a quota?

A. a decision to prevent certain goods from being imported

B. a tax placed on imported goods when they enter the country

C. a tax placed on goods when they are purchased in the marketplace

D. a limit to the number or amount of a foreign-produced good that is allowed into the country

D. a limit to the number or amount of a foreign-produced good that is allowed into the country


Crct test prep page 1122

CRCT Test Prep page 112

329. What is an embargo?

A. a tax placed on goods coming into the country from overseas

B. a limit to the number or amount of a foreign-produced good that is allowed into the country C. a tax paid by the producer before he can sell his goods in another country

D. a formal halt to trade with a particular country for economic or political reasons

D. a formal halt to trade with a particular country for economic or political reasons


Middle eastern economies

OPEC

GPS: SS7E6c. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC)

E.Q.: What is the function of OPEC?


Middle eastern economies

OPEC

  • Created in 1960 by oil producing countries, mostly in SW Asia

  • They wanted to work together to regulate the supply and price of oil exported to other countries.

  • Supply and Demand: When OPEC countries produce more oil, the price drops. When they produce less the price goes up.


Crct test prep page 113

CRCT Test Prep page 113

330. Why was OPEC created?

A. to regulate the supply and price of oil

B. to design new machinery to get oil out of the ground

C. to help the Palestinians with their problems with Israel

D. to keep countries that are not members from producing any oil

A. to regulate the supply and price of oil


Crct test prep page 1131

CRCT Test Prep page 113

331. What happens to the price of oil when OPEC countries decide to limit production?

A. prices rise

B. price drop

C. prices stay the same

D. oil stops being sold

A. prices rise

Prices rise

Stop oil production


Crct test prep page 1132

CRCT Test Prep page 113

332. Where are most of the OPEC countries located?

A. Africa

B. South America

C. North America

D. Southwest Asia

D. Southwest Asia


Currency exchange

Currency Exchange

GPS: SS7E6d. Explain why international trade requires a system for exchanging currencies between nations.

E.Q. Why does international trade require a system for exchanging currencies between nations?


Exchange rates

Exchange Rates

  • Most countries in SW Asia have their own type of currency.

  • In order to pay for goods they trade with each other, they had to set up a system for changing from one type of currency to another.

  • This is called an exchangerate.

  • Without a system for exchanging currencies, it would be very difficult to conduct international trade.


Crct test prep page 114

CRCT Test Prep page 114

333. Why is it important for nations to have a system to convert from one currency to another?

A. Converting to different currencies makes goods cost less.

B. Banks are not able to handle different kinds of currencies.

C. The dollar is the most valuable currency in the world today.

D. This makes it possible to buy and sell goods between nations with different types of currencies.

D. This makes it possible to buy and sell goods between nations with different types of currencies.


Relationship of capital to gdp

Relationship of Capital to GDP

in

Israel, Saudi Arabia, and Iran


Gdp and capital

GDP and Capital

  • GPS: SS7E7a. Explain the relationship between investment in human capital and GDP.

  • GPS: SS7E7b. Explain the relationship between investment in capital and GDP.

  • E.Q.: How does investment in human capital affect GDP?

  • E.Q.: How does investment in capital (physical) affect GDP?


Middle eastern economies

GDP

  • GDP, or Gross Domestic Product, is determined by taking the total value of all goods and services produced by a country in a single year.

  • GDP per capita is the GDP divided by the total population.

  • You can tell how wealthy a country is by looking at the GDP per capita.


Human capital

Human Capital

  • The knowledge, skills, and experience of people that make it possible for workers to earn a living producing goods and services.

  • Human capital can be increased by investing in education, health care, and job training.


Middle eastern economies

  • 3 prime components to improving a nation's human capital:

    • importing skilled labor

    • educating the population

    • providing for its health


Physical capital

(Physical) Capital

  • Capital goods (buildings, machines, and technical equipment used in production) are important to economic growth.

  • Producing more goods for sale in a quicker, more efficient way leads to greater profit and economic growth.


Capital investment increases gdp

Capital investment increases GDP

  • Investing in capital increases a company’s profit and makes for satisfied workers.

  • When countries invest in capital, they have higher GDPs.


Set up a flow chart like this for israel saudi arabia and iran

Set up a Flow Chart Like This for Israel, Saudi Arabia, and Iran

Physical Capital

GDP

Human Capital


Israel human capital

Israel Human Capital

  • Israel spends 6.9% of GDP on education

  • Literacy: 97.1%

  • Years spent in school:15

  • Invests in human capital so workers will be able to work in industry and technology


Israel physical capital

Israel Physical Capital:

  • Has invested heavily in capital goods because much of their economy depends on technology, industry, and advanced communications systems (not many natural resources).

  • Has invested heavily in agricultural technology.

  • Has also heavily invested in defense industry.


Israel1

Israel

  • GDP: $31,400 (2011 est.)


Saudi arabia human capital

Saudi Arabia Human Capital

  • Saudi Arabia spends 6.8% of GDP on education

  • Literacy: 78.8%

  • Years spent in school: 9

  • Invests in human capital – it takes a well educated, well-trained workforce to operate the technology involved in the oil industry.


Saudi arabia physical capital

Saudi Arabia Physical Capital

  • Has invested heavily in capital goods, especially technology related to oil production, transportation, and communication.


Saudi arabia1

Saudi Arabia

  • GDP: $24,500 (2011 est.)


Iran human capital

Iran Human Capital

  • Iran spends 4.9% of GDP on education

  • Literacy: 77%

  • Years spent in school: 11.3

  • Has invested in human capital - good schools for jobs in advanced technology


Iran physical capital

Iran: Physical Capital

  • Has made great investments in capital goods related to oil production, technology, and communication.

  • Has also invested heavily in defense industry.

  • Has inefficiency and poor organization in the parts of the economy under government control


Middle eastern economies

Iran

  • GDP: $13,200 (2011 est.)


Crct test prep page 115

CRCT Test Prep page 115

334. What is human capital?

A. skills and education workers have

B. taxes collected from a country’s workers

C. money paid to workers for producing goods

D. The amount of goods sold in foreign trade in a year

A. skills and education workers have


Crct test prep page 116

CRCT Test Prep page 116

335. Why have the Israelis made a big investment in human capital?

A. Their main industry is the oil industry.

B. Investing in human capital takes very little money.

C. They have to bring in workers from other countries.

D. They need well-trained workers because their economy depends on advanced technology.

D. They need well-trained workers because their economy depends on advanced technology.


Crct test prep page 1161

CRCT Test Prep page 116

336. Why would the Saudi oil industry need a large investment in human capital?

A. The technology in the oil industry is very complicated.

B. The Saudis have found it hard to make a profit in the oil industry.

C. Most people working in the Saudi oil industry have little or no real training.

D. They hope to have machines take over most of the jobs now done by workers.

A. The technology in the oil industry is very complicated.


Crct test prep page 1162

CRCT Test Prep page 116

337. One of Iran’s biggest problems with their state-run oil industry is

A. few remaining large oil deposits.

B. lack of a market for their product.

C. inefficiency and poor organization.

D. a labor force that does not want to work.

C. inefficiency and poor organization.


Crct test prep page 1163

CRCT Test Prep page 116

338. If a country does not invest in its human capital, how can it affect the country’s GDP?

A. Investment in human capital has very little effect on a country’s GDP.

B. Most workers want to keep their jobs and do not care about GDP.

C. GDP is only affected if workers pay for the investment out of their own pockets.

D. GDP may go down because poorly trained workers will not be able to do their jobs as well.

D. GDP may go down because poorly trained workers will not be able to do their jobs as well.


Crct test prep page 117

CRCT Test Prep page 117

339. What are capital goods?

A. the workers who make the goods and services

B. the factories and machines used to make goods

C. the money spent to train workers to use new technology

D. the goods and services that are produced for a country’s economy

B. the factories and machines used to make goods


Crct test prep page 1171

CRCT Test Prep page 117

340. Israel has invested heavily in capital goods in all of the following areas EXCEPT

A. oil

B. defense

C. communication

D. farming and agriculture

A. oil


Middle eastern economies

OIL

  • GPS: SS7E7c. Explain the role of oil in these countries’ economies.

  • E.Q.: How does oil affect these countrie’s economies?


Importance of oil

Importance of Oil

  • In SW Asia, one of the most important natural resources is oil.

    • Over ½ of the world’s known oil supplies are found in SW Asia

  • Oil and natural gas are fossil fuels – nonrenewable resources.

  • Most industrial nations depend heavily on a steady supply of oil and natural gas.

  • We import about ½ of the oil we use (about 18 million barrels PER DAY!)


Middle eastern economies

  • SW Asian countries, therefore, already have a market for their oil.

  • Many of them have become very rich in the last 50 years as the world demand for oil and gas have increased.

  • Saudi Arabia & Iran are 2 of the world’s largest oil producers.

  • Israel has few resources and almost no oil.


Middle eastern economies

Israel

  • Israel has a highly developed industrial economy which needs oil and gas to operate.

  • World price of oil has huge impact on Israel.

  • Israel mines minerals like phosphates and Dead Sea salt to sell, but depends on technology for most of its GDP.


Saudi arabia from desert kingdom to modern nation in 100 years

Saudi Arabia: from Desert Kingdom to Modern Nation in 100 years

  • Has very few natural resources

  • Has lots of oil

  • Has allowed Saudi Arabia to become very influential in the world economy and OPEC

  • Oil $$$ has allowed Saudi Arabia to

    • Modernize agriculture, roads, schools, airports, communications systems

    • Improve ordinary citizens’ lives


Middle eastern economies

Iran

  • Has rich farmland

  • Has access to water for irrigation and farming

  • Has varied economy – OIL is largest contributor to GDP (85% of GDP comes from oil!)

  • 1/3 of people work in agriculture

  • Political problems have slowed economy

  • Member of OPEC


Crct test prep page 118

CRCT Test Prep page 118

341. Why are oil and gas such valuable natural resources?

A. Large deposits of oil and gas are found in most countries.

B. It is easy to replace oil and gas supplies after they are used.

C. Industrial countries depend on oil and gas as their energy supply.

D. Oil and gas are the only sources of energy used around the world.

C. Industrial countries depend on oil and gas as their energy supply.


Crct test prep page 1181

CRCT Test Prep page 118

342. How much of the oil used by the U.S. has to be imported every day?

A. 33%

B. 50%

C. 75%

D. nearly 100%

B. 50%


Crct test prep page 1182

CRCT Test Prep page 118

343. How has the Saudi government used its national wealth to change the country?

A. All Saudi citizens are given an equal share of the national wealth.

B. The Saudi government has spent very little to improve the lives of ordinary citizens.

C. A majority of the national wealth has been given to religious organizations in the country.

D. The government has paid for improvements in transportation, education, health care, and agriculture.

D. The government has paid for improvements in transportation, education, health care, and agriculture.


Crct test prep page 1183

CRCT Test Prep page 118

344. How do Iran and Saudi Arabia benefit from belonging to OPEC?

A. OPEC keeps the price of oil high on the world market.

B. Countries in OPEC are able to share water resources with each other.

C. The organization sets up tariffs to protect SW Asian manufacturing.

D. OPEC makes it possible for SW Asian countries to buy oil at low prices.

D. OPEC makes it possible for SW Asian countries to buy oil at low prices.


Entrepreneurs

Entrepreneurs

GPS: SS7E7d. Describe the role of entrepreneurship.

E.Q.: How does entrepreneurship affect economic growth?

Entrepreneurs take risks to create new businesses and products.


Crct test prep page 119

CRCT Test Prep page 119

345. What is an entrepreneur?

A. people who enjoy saving all their money

B. business people who try not to take risks with their money

C. someone who is always successful in whatever he attempts

D. someone who is willing to take a risk to begin a new business

D. someone who is willing to take a risk to begin a new business


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