Trade and Economic Growth SW Asia Unit 3 Voluntary Trade Factors involved in Voluntary Trade 1. Specialization 2. Trade Barriers 3. Currency Exchange 4. Control of Supply Specialization Define: -specialization: The products a country makes best and are demand in the world market. -interdependence: A relationship between countries in which they rely on one another for resources, goods, or services. Specialization Think- Pair-Share Example: Specialization EQ: How does specialization encourage trade between countries? If a country produces the goods they can make most efficiently, that country can trade them for goods made by others that cannot be produced locally. Trade Barriers Definition: The prevention of free trade Trade Barriers Physical Trade Barriers: (give 2 examples) -mountains -deserts -lack of rivers, bodies of water Trade Barriers Political Trade Barriers: -tariff A tax placed on goods when they are brought (imported) into one country from another country. -quota A limit to the number of amount of a foreignproduced goods that is allowed into a country. -embargo A formal halt to trade with a particular country for economic or political reasons. System for Exchanging Currency Define: -currency: Paper or coins that a country uses for its money supply. -international trade: Countries trading with each other to obtain resources, goods, and services. -exchange rate: A system of changing one type of currency to another. System for Exchanging Currency Why does international trade require a system for exchanging currency between countries? So that it is possible to buy and sell goods between nations with different types of money. OPEC Organization of Petroleum Exporting Countries OPEC Define -supply: The amount of a good or service available for sale in a market. -demand: The amount of a good or service wanted in a market. OPEC What is the primary function of OPEC? To control the supply and price of oil. OPEC Give some examples of what petroleum (oil) is used for: cars lawn mowers machinery to make plastic products Economic Growth 4 Factors that influence Economic Growth 1. Labor 2. Capital Goods 3. Land(resources) 4. Entrepreneurship Relationship between human capital and GDP Define: -GDP: Gross Domestic Product The value of all goods and services produced within a country in a given year and converted into US dollars for comparison. Relationship between human capital and GDP -human capital The knowledge and skills that make it possible for workers to earn a living producing goods or services. Relationship between human capital and GDP Companies that invest in human capital profitable are more_____________________. Countries that invest in human capital have ______________________GDP’s higher because_______________________ they invest in educating and training their citizens. Relationship between human capital and GDP Think- Pair-Share Example: Relationship between capital goods and GDP Define: -capital goods The factories, machines, and technology that people use to make products to sell. 3 examples of capital goods: - oil producing technology - communications equipment - assembly line machinery Relationship between capital goods and GDP Companies that invest in capital goods profitable are more__________. Countries that invest in capital goods higher have _________________ GDP’s they can produce more goods because_________________________ in a quicker and efficient way. Relationship between capital goods and GDP Example: Think-Pair-Share The Role of Oil in SW Asia Economy Another name for oil is_____________. petroleum The Role of Oil in SW Asia Economy Countries WITH oil in SW Asia tend to have: •Higher GDP •Higher standard of living Countries WITHOUT oil (except Israel) tend to have: •Lower GDP •Lower standard of living The Role of Oil in SW Asia Economy Israel has very little _____. oil However, high GDP Israel has a ____________________ human and because they invested in ________ capital technology ___________ goods for ___________ communication and _______________ industries. Entrepreneurship Define: -entrepreneur Creative, original thinkers who are willing to take risks to create new businesses and products. Entrepreneurship risk An entrepreneur is willing to take a_____ profit in order to make a________________. Entrepreneurship Think-Pair-Share Example Answer EQ’s Paragraph form- use all of the vocabulary that are in your graphic organizers: 1. What factors encourage economic growth? 2. What factors encourage trade between countries?