Economics of Economics of Southwest Asia (Middle Southwest Asia (Middle East)East)

Standard SS7E6 a,b,dStandard SS7E6 a,b,d

SS7E7a-dSS7E7a-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?What is specialization?

A situation in which people produce A situation in which people produce a narrower range of goods and a narrower range of goods and services than they consume. services than they consume. Specialization Specialization increases productivityincreases productivity; ; it also requires trade and it also requires trade and increases increases interdependence.interdependence.

In other words…producing a few In other words…producing a few things even though you buy and things even though you buy and consume many more.consume many more.

Specialization Tip #1Specialization Tip #1

SpecializationSpecialization benefits all people, whether benefits all people, whether acting as individuals, groups or nations. Not acting as individuals, groups or nations. Not only is specialization the cause of domestic only is specialization the cause of domestic efficiency, efficiency, it is the basis for international it is the basis for international trade as well.trade as well.

Nations may also specialize in the production Nations may also specialize in the production of particular goods and services. When they of particular goods and services. When they specialize and trade with other nations, specialize and trade with other nations, citizens of both countries are able to citizens of both countries are able to consume more goods and services than they consume more goods and services than they would otherwise.would otherwise.

Special FriendsSpecial Friends

Working with a partner you will Working with a partner you will discover the benefits of discover the benefits of specialization and trade.specialization and trade.

““The Wide World of Trade: Lesson 2 The Wide World of Trade: Lesson 2 Special Friends” Special Friends” (Unit 4 folder-in PPTs (Unit 4 folder-in PPTs

folder)folder)

Why is specialization and Why is specialization and trade important in trade important in Southwest Asia?Southwest Asia? Southwest Asia (Middle East) Southwest Asia (Middle East)

specializes in the production of specializes in the production of oil. Because they specialize in oil oil. Because they specialize in oil production they must import production they must import much of their food and other much of their food and other everyday life products.everyday life products.

What is What is interdependence?interdependence? A situation in which events in one A situation in which events in one

part of the world or sector of the part of the world or sector of the economy affect other parts of the economy affect other parts of the world or other sectors of the world or other sectors of the economy.economy.

A few quick questions:A few quick questions:

How are countries of Southwest How are countries of Southwest Asia interdependent?Asia interdependent?

Is Southwest Asia dependent on Is Southwest Asia dependent on countries outside of its own countries outside of its own region?region?

Everyone is Everyone is interdependentinterdependent

In this lesson you will learn about In this lesson you will learn about resources from around the world resources from around the world that are used in the production of that are used in the production of

a specific product.a specific product.

““The Wide World of Trade: Lesson 3 The Wide World of Trade: Lesson 3 Everyone is interdependent” Everyone is interdependent” (Unit 4 (Unit 4

folder-in PPTs folder)folder-in PPTs folder)

Standard 7E6 continued:

b. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos.

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 a nuclear war.

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. embargoB. quotaC. exchange rateD. tariff

Answer

(A) EmbargoWhy 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. 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-ShekelSaudi Arabia- Saudi riyalSyria- Syrian pound

How Does An Exchange Rate Work?

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 Growth- Why 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 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?

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? 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? 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?

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 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 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

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 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?