Download Economics of South West Asia (Middle East)

Economics of
Southwest Asia (Middle
East)
Standard SS7E6 a,b,d
SS7E7a-d
Economics Handbook in
Textbook
Many of the economic concepts
discussed in the following slides
can be found in the Economics
Handbook at the back of the
textbook.
 Definitions plus examples are
provided.

Standard


SS7E6 The student will explain
how voluntary trade benefits
buyers and sellers in Southwest
Asia (Middle East).
a. Explain how specialization
encourages trade between
countries.
Enduring Understanding

Students will understand that the
production, distribution, and
consumption of goods/services
produced by the society are
affected by the location, customs,
beliefs, and laws of the society.
Essential Question
 How
does specialization
encourage trade between
countries in Southwest
Asia?
What is specialization?


A situation in which people produce a
narrower range of goods and services
than they consume. Specialization
increases productivity; it also requires
trade and increases interdependence.
In other words…producing a few
things even though you buy and
consume many more.
Specialization Tip #1


Specialization benefits all people, whether acting as
individuals, groups or nations. Not only is
specialization the cause of domestic efficiency, it is
the basis for international trade as well.
Nations may also specialize in the production of
particular goods and services. When they
specialize and trade with other nations, citizens of
both countries are able to consume more goods
and services than they would otherwise.
Special Friends
Working with a partner you will discover
the benefits of specialization and
trade.
“The Wide World of Trade: Lesson 2
Special Friends” (Unit 4 folder-in PPTs folder)
Why is specialization and
trade important in
Southwest Asia?

Southwest Asia (Middle East)
specializes in the production of oil.
Because they specialize in oil
production they must import much of
their food and other everyday life
products.
What is interdependence?

A situation in which events in one part
of the world or sector of the economy
affect other parts of the world or other
sectors of the economy.
A few quick questions:


How are countries of Southwest Asia
interdependent?
Is Southwest Asia dependent on
countries outside of its own region?
Everyone is
interdependent
In this lesson you will learn about
resources from around the world that
are used in the production of a specific
product.
“The Wide World of Trade: Lesson 3
Everyone is interdependent” (Unit 4 folder-in
PPTs folder)
Standard 7E6 continued:

Compare and contrast
different types of trade
barriers, such as tariffs,
quotas, and embargos.
b.
Trade Barrier
A
trade barrier is something
which limits trade between
countries.
 Why would a country limit its
trade with other countries?
 Governments
sometimes limit
trade to protect the country’s
businesses from foreign
competition.
 Why would a government do
this?
Types of Trade Barriers
Tariffs are taxes on imports.
 What is an import?
 By taxing imported goods, a
country can protect the goods
made in its own country.
 The tariff (tax) will make an
imported good cost more.

Quotas
Quotas limit the number of goods
that can be imported from a
certain country.
 It has the same affect as tariffs
because it makes certain items
harder to get.
 When things are rare or hard to
buy, their price increases.

Embargos




Not all trade barriers are good for
economies.
An embargo is a ban on trade with a certain
country.
Embargos are usually political, not
economic.
For example, the US has had a trade
embargo with Cuba for 45 years. The ban
was placed in 1962 because of tensions
between the two nations that almost led to
Compare and Contrast
 How
are these trade barriers
alike and different?
 Which trade barriers can
benefit a country and why?
 Which trade barriers are not
beneficial to a country and
why?
A Question for You


The United States Custom Service has found
toxic lead-based paint in toys purchased fro
a Chinese toy-making company. These toys
are intended for sale in the US. Exposure tot
eh paint over a long time could be fatal to
children under 6 years old.
What type of trade barrier would guarantee
that no child in the US would be exposed tot
eh deadly lead-based paint?
 A.
embargo
 B. quota
 C. exchange rate
 D. tariff
Answer
 (A)
Embargo
 Why is the answer embargo
and not the others?
SS7E6 continued:
 d.
Explain why international
trade requires a system for
exchanging currencies
between nations
Countries in Southwest Asia
have different currencies.


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The use of currency or money as a
way to purchase goods is essential to
trade.
Sometimes this can be a problem
when countries with different
currencies trade.
To solve this problem, countries use
an exchange rate.



An exchange rate is a ratio where a
unit of two currencies can be traded.
The exchange rate determines how
much money a currency is worth in
another currency.
What makes differing currencies even
more complicated is that the exchange
rates are always changing.
Examples of countries and
their currencies
 Iran-
Iranian rial
 Iraq- Iraqi dinar
 Israel-Shekel
 Saudi Arabia- Saudi riyal
 Syria- Syrian pound
How Does An Exchange Rate
Work?


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For example, one US dollar is worth about
4.5 Israeli shekels.
4 Saudi riyals equal one US dollar.
How did some European countries handle
this challenge?
Do you think Southwest Asian countries
might do the same?
Currency Conversion
Tools
 www.xe.com/ucc/

www.x-rates.com/ - 24k
Questions for you
 Why
does there need to be
a currency exchange
system?
 How do you think this has
helped or hindered trade in
Southwest Asia?
SS7E7 The student will describe
factors that influence economic
growth and examine their presence or
absence in Europe.
a.
Explain the relationship
between investment in
human capital (education
and training) and gross
domestic product (GDP).
Factors of Economic GrowthWhy does a country want to
grow economically?
All countries want economic
growth.
 Economic growth means that a
country is developing its economy,
increasing national revenue
(making money), and improving
its citizens’ standard of living.

Factors of Economic
Growth

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Factor #1- Human Capital
Refers to the country’s investment in
training the citizens of a country,
providing educational opportunities,
and providing healthcare.
Think more locally- How does Georgia
provide a college education to its
students?
Why does Georgia do this?


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Investment in human capital provides
a healthier and better educated
workforce.
Why would a country invest in human
capital?
When a country’s people are more
productive and healthier, the economy
is stronger in that country.
More human capital = a stronger
economy.
How Do Capital Goods Help
a Country Grow
Economically?
Factor #2- Capital Goods
 Capital goods are goods used to
make other goods like factories,
machinery, and technology.
 The more capital goods a country
has, the more it can produce.
 The more a nation produces, the
more self-sufficient it is and the
more money it can make.

More capital goods= more
economic growth.
 The opposite is also true: if a
country is experiencing political or
economic problems and the
production of capital goods
decrease, there is less economic
growth.

How Do Natural Resources
Help a Country to Grow
Economically?

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Factor #3- Natural Resources
What is a natural resource? Nations
that are rich in natural resources can
export (trade) countries for revenue.
Have students look at natural
resources in Southwest Asia. What
natural resources are found in SW
Asia?
How are the natural resources
distributed in SW Asia?
How do you think the availability
of natural resources in a country
affects its economic growth?
 Turn and talk with your neighbor.
 Finish this equation more natural
resources = more_____________.

How Does Entrepreneurship
Help a Country Grow
Economically?

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Factor #4- Entrepreneurship
Do you remember what an entrepreneur is?
Entrepreneurs help a country grow
economically.
Private production by individuals helps the
nation to grow by creating competition
between businesses.
Can you think of businesses that compete
by producing similar products?
How does the competition
help the economy?

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Entrepreneurs think of new and better
ways to produce their product.
This innovation and invention leads to
production of more product therefore
providing more jobs.
More jobs mean more people have
money to spend.
More entrepreneurship= more
economic growth.
Gross Domestic Product



Review the four factors which lead to
economic growth.
If a nation invests in these four
factors, the economy will _________.
If a nation produces many goods and
services and therefore has a strong
economy, the Gross Domestic
Product is high.
DEFINE GDP
The GDP of a nation is the total
amount of goods and services a
nation produces in a year.
 How do you think economic
growth and GDP are connected?
 Write a quick response in your
notebook.
 Discuss with the class.

Connection between GDP
and a country’s economy

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The GDP is one way to compare countries’
economies.
The higher a countries’ GDP the stronger
the economy and therefore the country is
wealthier.
Sometimes it is easier to break down the
GDP into a per person average in a country.
This is called per capita income or per capita
GDP. On the average this is what a person
would make as an income in that country.
Southwest Asian Countries’
GDP based on per capita
(per person)- 2010
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Saudi Arabia- $24,200
Israel- $29,800
Bahrain- $40,300
Iraq- $3,800
Iran- $10,600
Afghanistan- $900
Kuwait- $48,900
Yemen- $2,700
United States- $47,200
Application
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Make a chart of these countries’
GDP per capita.
You may rank lowest to highest or
highest to lowest.
Make a bar graph of the per
capita GDP with a title for your
graph.
Write a paragraph describing the
conclusions you have drawn from
your graph.
What can you conclude about
these countries’ economies?
 What statements can you
make about certain countries’
factors of economic growth?
Remember #’s 1,2,3,4 from
the previous slides.

c. Explain the role of oil in
these countries’ economies

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Do the Southwest Asian countries
listed in your graph have access to oil
fields?
How do you think the presence or
absence of oil resources in a country
affects economic development?
Does the presence of oil in a country
make the country’s economy stronger?