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Middle east unit 3 part 3 econ

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Middle east unit 3 part 3 econ

  1. 1. <ul><li>Every society must deal with providing goods and services for its people </li></ul><ul><li>Each society must also develop an economic system that can decide how to use the limited resources of that society as well. </li></ul><ul><li>Three basic questions must be answered: </li></ul><ul><ul><li>1) What goods and services will be produced? </li></ul></ul><ul><ul><li>2) How will goods and services be produced? </li></ul></ul><ul><ul><li>3) Who uses the goods and services that are produced? </li></ul></ul>
  2. 2. <ul><li>In a traditional economy , most of the economic decisions are made based on custom and on the habit of how such decisions were made in the past. </li></ul><ul><li>Goods and services are exchanged instead of using cash as a payment in a traditional economy </li></ul><ul><li>This is known as bartering </li></ul><ul><li>As areas become more urbanized, however, bartering gives way to cash as payment. </li></ul><ul><li>In the Middle East, traditional economies can still be found in rural areas of many countries in this region </li></ul><ul><li>No country today can be described as having a traditional economy </li></ul>
  3. 3. <ul><li>A command economy is one in which government planning groups make most of the economic decisions for the workers </li></ul><ul><li>This group decides which goods and services should be produces, as well as prices for the goods and wages paid to the workers </li></ul><ul><li>No individual could decided to start a new business </li></ul><ul><li>The government decided what and where to produce the goods. </li></ul><ul><li>The government decides what jobs the workers do and where the goods produced would be sold </li></ul>
  4. 4. <ul><li>The third basic type of economic system is a market economy . </li></ul><ul><li>In a market economy, economic decisions are made by individuals who decide what to produce and what to buy </li></ul><ul><li>Other names for a market economy are capitalism , free enterprise , or laissez-faire (French phrase that means to allow them to do as they please) </li></ul><ul><li>Individuals who want to begin their own business may do so - they take economic risk as they invest in their new business </li></ul><ul><li>If new businesses are successful, the people who organized and funded it will be successful and make a profit </li></ul><ul><li>If the business fail, the investors will lose money </li></ul>
  5. 5. <ul><li>Today, no countries in the world have economic systems that are purely traditional, purely command, or purely market systems </li></ul><ul><li>India is a good example of a mixed economy in Asia </li></ul><ul><li>The government makes some decisions about agriculture and industry, but free enterprise and entrepreneurship are very common. </li></ul><ul><li>Nearly all countries today have mixed economies – they have characteristics of a free market and free enterprise as well as some government planning and control </li></ul>
  6. 6. <ul><li>Not every country can produce all of the goods and services it needs </li></ul><ul><li>Because of this, countries specialize in producing those goods and services they can provide best and most efficiently </li></ul><ul><li>They look for others who may need these goods and services so they can sell their products </li></ul><ul><li>The money earned by such sales then allows the purchase of goods and services the first county is unable to produce </li></ul><ul><li>In international trade, no country can be completely self-sufficient (produce all the goods and services it needs) </li></ul><ul><li>Specialization creates a way to build a profitable economy and to earn money to buy items that cannot be made locally </li></ul>
  7. 7. <ul><li>Some countries in Southwest Asia are very rich in oil and natural gas, but they lack farmland and the ability to produce enough food </li></ul><ul><li>Saudi Arabia is able to specialize in the production of oil and natural gas and sell these products at great profit on the world market </li></ul><ul><li>The money earned in this trade can then be used to purchase food and the technology needed to make their agriculture system more efficient </li></ul><ul><li>Israel has little in the way of oil wealth, but they have become leaders in agricultural technology even though they have a limited supply of land suitable for farming </li></ul><ul><li>They can sell this technology to earn the money to supplement their limited production of food </li></ul>Israeli Desert cabbage
  8. 8. <ul><li>Trade barriers are anything that slows down or prevents one country from exchanging goods with another </li></ul><ul><li>Some trade barriers are put in place to protect local industries from lower priced goods made in other countries </li></ul><ul><li>Other times trade barriers are created due to political problems between countries </li></ul><ul><li>Trade is stopped until the political issues are settled </li></ul><ul><li>A tariff is a tax placed on goods when they are brought into ( imported ) from one country to another country </li></ul><ul><li>The purpose of a tariff is usually to make the imported item more expensive than a similar item made locally </li></ul><ul><li>This sort of a tariff is called a protective tariff because it protect local manufacturers from competition coming from cheaper goods made in other countries </li></ul>
  9. 9. <ul><li>A quota is a different way of limiting the amount of foreign goods that can come into a country </li></ul><ul><li>A quota sets s specific amount or number of a particular product that can be imported or acquired in a given period of time </li></ul><ul><li>A third type of trade barrier is called an embargo </li></ul><ul><li>An embargo is 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 </li></ul><ul><li>Embargoes usually come about when two countries are having political disputes </li></ul><ul><li>Embargos often cause problems for all countries involved </li></ul><ul><li>The US currently has embargos against Cuba, Iran, & North Korea </li></ul><ul><li>An example is when OPEC launched an oil embargo in 1973 against nations that supported Israel in the Yom Kippur War </li></ul>
  10. 10. <ul><li>Most of the countries in Asia have their own type of currency (money). </li></ul><ul><li>In order for them to pay for goods as they trade with each other, they have to establish a system of changing from one type of currency to another </li></ul><ul><li>This system is know as an exchange rate </li></ul><ul><li>They also have to be able to exchange their currencies with those used by other countries around the world </li></ul>
  11. 11. <ul><li>Human capital means the knowledge and skills that make it possible for workers to earn a living producing goods or services </li></ul><ul><li>The more skills and education workers have, the better they are able to work without mistakes and to learn new jobs as technology changes </li></ul><ul><li>Companies that invest in better training and education for their workers generally earn more profits </li></ul><ul><li>Good companies also try to make sure working conditions are safe and efficient, so their workers can do their jobs without risk </li></ul><ul><li>Companies that have invested in human capital through training and education are most likely to have profitable businesses and more satisfied workers than companies that do not make these investments </li></ul><ul><li>Countries where training and education are easily available often have higher production levels of goods and services, therefore higher gross domestic product, than countries that do not offer these opportunities </li></ul>
  12. 12. <ul><li>Israel has wide access to education and an economy that depends on technology industries to make up for the country’s lack of natural resources </li></ul><ul><li>Many Israelis work in industries related to medical technology, agricultural technology, mining, and electronics </li></ul><ul><li>They also have highly developed service industries (businesses that supply the needs of the rest of the working population) </li></ul><ul><li>Israeli GDP is very high because they have invested heavily in their human capital </li></ul><ul><li>Saudi Arabia’s main industry is as an exporter of oil (petroleum) </li></ul><ul><li>The technology involved in the oil industry is complicated and requires well-trained and educated labor force </li></ul><ul><li>Saudi Arabia also has enormous building projects which require investment in human capital </li></ul><ul><li>By contrast, some Saudi citizens still practice traditional economic activities such as farming and herding animals </li></ul><ul><li>Because oil is such an important part of the world’s economy, the Saudi GDP is high </li></ul>
  13. 13. <ul><li>Capital goods (the factories, machines, and technology that people use to make products to sell) are important to economic growth. </li></ul><ul><li>Advanced technology and the organization of this technology into factories where many workers can work together increases production and makes the production more efficient </li></ul><ul><li>Producing more goods for sale in a quicker and more efficient way leads to economic growth and greater profit </li></ul><ul><li>This greater profit leads to a higher GDP </li></ul><ul><li>Middle Eastern countries have invested heavily in Capital Goods in such areas as oil production, communications, and the defense industry. </li></ul>
  14. 14. <ul><li>Distribution of natural resources throughout Asia plays a major part in determining the type of work people do and how comfortable they are able to live </li></ul><ul><li>A natural resource is something that is found in the environment that people need </li></ul><ul><li>Water, trees, rich soil, minerals, and oil are all examples of natural resources </li></ul><ul><li>One of the most valuable resources in this part of the world is rich farmland </li></ul>
  15. 15. <ul><li>Literacy , or the ability to read and write, has a big effect on the standard of living of a country </li></ul><ul><li>Those who cannot read or write have a very difficult time finding decent jobs </li></ul><ul><li>Lack of education also prevents many young people from becoming the engineers, doctors, scientist, or entrepreneurs that modern economies need in order to bring improvements to their countries </li></ul><ul><li>In many parts of the world, education is only available to those who can afford to pay for it themselves </li></ul><ul><li>In those countries, the literacy rate is often quite low </li></ul><ul><li>Countries that have stronger economies usually make money available so that anyone who wants an education can go to school </li></ul>
  16. 16. <ul><li>One way to measure the standard of living is the Gross Domestic Product , or GDP </li></ul><ul><li>The GDP is the value of all goods and services produced within a country in a given year and converted into US dollars for comparison </li></ul><ul><li>When divided into a value per capita (or per person), it can be used as a measure of the living conditions in a country </li></ul><ul><li>The higher the GDP value, the better the living conditions in the country </li></ul>
  17. 17. Part 4 - Middle East Economics <ul><li>There are many different types of economic systems in the Middle East. </li></ul><ul><li>Many countries have mixed economies with different levels of government control. </li></ul><ul><li>Some countries are less developed than others in the region. </li></ul><ul><li>Middle Eastern countries have thrived on producing exports to other countries. </li></ul><ul><li>Cash crops have included grain, silk, and cotton. </li></ul><ul><li>For the last sixty years, the region’s main export has been oil. </li></ul><ul><li>The region imports much of its food and other essential products. </li></ul>
  18. 18. Oil <ul><li>Oil is one of the most important and valuable natural resources in the Middle East </li></ul><ul><li>Oil and Natural gas are called fossil fuels, which mean they were created when plants and animals that lived centuries ago decayed underground </li></ul><ul><li>Oil and natural gas are also considered non-renewable natural resources, meaning they cannot be replaced once they are taken out of the ground </li></ul><ul><li>Most of the world's industrial nations depend on a steady supply of oil and natural gas </li></ul><ul><li>The US has to import nearly half of all the oil it uses, almost 18 million barrels every day </li></ul><ul><li>Many countries of the Middle East have become very rich over the past 50 years as the world demand for oil and gas has increased </li></ul><ul><li>Over half of the world’s known oil reserves come from the Middle East </li></ul>
  19. 19. Israel <ul><li>Israel has a mixed economy that is also technologically advanced. </li></ul><ul><li>The Israeli government and private Israeli companies own and control the economy. </li></ul><ul><li>Israel does not have many natural resources. </li></ul><ul><li>Israel has to import grain, oil, military technologies, and many other goods. </li></ul><ul><li>The country is a producer of high-tech equipment, electronics, biomedical industries, and cut diamonds. </li></ul><ul><li>The service industry accounts for much of Israel’s economy – areas such as insurance, banking, retail, and tourism account for over half of it. </li></ul><ul><li>Israel relies heavily on US economic and military aid. </li></ul>
  20. 20. Saudi Arabia <ul><li>Saudi Arabia also has a mixed economy but leans toward government control.. </li></ul><ul><li>Saudi Arabia’s main export is oil. </li></ul><ul><li>The oil industry has made the Saudi royal family quite wealthy. </li></ul><ul><li>In fact, several members of the royal family are among the wealthiest people in the world. </li></ul><ul><li>Oil accounts for well over half if the country’s economy. </li></ul><ul><li>Oil funds the country’s education, defense, transportation, health, and housing. </li></ul><ul><li>The government is trying to encourage more private businesses to boost the economy and decrease the countries dependence on oil. </li></ul>
  21. 21. Saudi Arabia <ul><li>Some gulf countries invest money to make their economies more diverse. </li></ul><ul><li>In the last few decades, Saudi Arabia has begun encouraging the development of industries other than oil in order to make its economy stronger. </li></ul><ul><li>In 1976, the Saudi government crated the Saudi Basic Industries Corporation. </li></ul><ul><li>The SBIC invests in capital goods. </li></ul><ul><li>These capital goods have made the country a steady producer of steel, industrial gasses, plastics, and petrochemicals. </li></ul>
  22. 22. Iran <ul><li>Iran has great oil wealth , like Saudi Arabia, through there is also a more mixed economy that has grown in spite of government attempts to keep tighter control </li></ul><ul><li>Iran’s command economy has not been very efficint in recent years </li></ul><ul><li>Even though there is oil wealth, many Iranians do not share in the money- much of it goes toward the military </li></ul>
  23. 23. Turkey <ul><li>The government of Turkey controls the country’s economy. </li></ul><ul><li>Turkey’s economy, however, is not entirely a command economy . </li></ul><ul><li>A large part of the country’s economy is based on farming. </li></ul><ul><li>The Turkish government has had many disputes with other countries over its use of natural resources, such as the Euphrates River. </li></ul><ul><li>Clothing and textiles are the countries major industries . </li></ul><ul><li>The service industry makes up about half of Turkey’s economy, as it does Israel's economy. </li></ul>
  24. 24. Economic Growth Israel <ul><li>Economic growth has been difficult to achieve for many Middle Eastern countries. </li></ul><ul><li>War is a major threat to the region’s economies. </li></ul><ul><li>For example, both war and a large number of immigrants present challenges to the Israeli economy. </li></ul><ul><li>The Israeli government has taken control of certain economic activities in order to address these problems. </li></ul><ul><li>The Israeli government controls most activities related to agriculture. </li></ul><ul><li>This helps the nation’s economy because the county’s natural resources are so limited. </li></ul>
  25. 25. Iran <ul><li>Wars can also influence a country’s economy by influencing what the country decides to produce. </li></ul><ul><li>Iran’s war with Iraq led Iran to put more money into its military industries. </li></ul><ul><li>The number of people without jobs is Iran is high. </li></ul><ul><li>The country provides less protection for its human capital than other countries do. </li></ul><ul><li>For example, Iran does not have private labor unions to protect workers. </li></ul><ul><li>It is a mixed economy on the side of government control of oil and major industries. </li></ul>
  26. 26. The 1973 Oil Crisis <ul><li>Some trade barriers are political. </li></ul><ul><li>Sometimes governments limit trade with other countries because they disagree with the actions or policies of those countries. </li></ul><ul><li>This is a trade barrier designed to purposefully hurt the economy of another country. </li></ul><ul><li>The 1973 oil crisis is one example of such a trade barrier. </li></ul><ul><li>The 1973 oil crises began on October 17, 1973. </li></ul><ul><li>OPEC announced that its member nations would no longer ship oil to countries that had aided Israel in its recent war with Egypt. </li></ul><ul><li>Those countries included the US and many in Europe. </li></ul><ul><li>OPEC raised the price of oil 70%. </li></ul><ul><li>As a result, the price of gasoline in the US quadrupled over several months. </li></ul>
  27. 27. <ul><li>These actions had a large impact on industrialized nations because of their growing dependence on oil and gas. </li></ul><ul><li>Western countries had been used to cheap and plentiful oil resources before the crisis. </li></ul><ul><li>Oil consumption had doubled in the US. </li></ul><ul><li>At the time, the US was using about 1/3 rd of the world’s energy. </li></ul><ul><li>The crisis caused the value of the US dollar to drop. </li></ul><ul><li>It also had a widespread negative impact on the world economy. </li></ul><ul><li>OPEC started shipping oil to Western nations again in 1974. </li></ul><ul><li>Western economies began to get stronger again. </li></ul>

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