Standards

SS7E6a. Explain how specialization
encourages trade between countries.
SS7E6b. Compare and contrast different
types of trade barriers, such as tariffs,
quotas, and embargos.
SS7E7a. Explain the relationship between
investment in human capital (education and
training) and gross domestic product (GDP).
Standards

SS7E7b. Explain the relationship between
investment in capital (factories, machinery, and
technology) and gross domestic product (GDP).
SS7E7c. Explain the role of oil in these
countries’ economies.
SS7E7d. Describe the role of entrepreneurship.
SS7G8e. Evaluate how the literacy rate affects
the standard of living.
Factors of Trade and
Economic Growth
Activity

After the Factors of Trade and
Economic Growth Activity, use the
remaining slides to review economic
factors that affect Southwest Asia.
Specialization

Countries specialize in what they do best.
http://www.econedlink.org/interactives/index.php?iid=185
Specialization increases trade because a
country can get what it needs at the
lowest cost when produced by someone
who specializes in producing that item.
Specialization
Factor Group 3
 Saudi Arabia, Iran, Iraq, and Kuwait export millions of
barrels of oil every day.
 The U.S. exports food, medicine, and raw materials to
Middle Eastern countries.
 Israel imports rough diamonds and exports the finished
product: cut and polished diamonds.
 The United States imports oil from the Middle East
because it does not have enough oil for the country’s
needs.
 In the past, Iran has made some efforts to export goods
other than oil, but its prices were too high to be
competitive
Specialization

Factors of Trade &
Economic Growth
Iran
Israel
Saudi Arabia
Specializes to
increase trade
Iran exports
millions of barrels
of oil every day.
Israel imports
rough diamonds
and exports the
finished product:
cut and polished
diamonds
Saudi Arabia
exports millions
of barrels of oil
every day.
Turn to an elbow partner and
describe how Iran, Israel, and
Saudi Arabia specialize to
increase trade.

Trade Barriers

Countries sometimes set up trade barriers
to restrict trade because they want to sell
and produce their own goods
Tariff: a tax placed on imported goods
Quota: a restriction on the amount of a
good that can be imported
Embargo: trade is forbidden with another
country
TRADE BARRIERS

Tariffs: higher price on imports = lower
demand on imports = higher demand
on domestic goods
TRADE BARRIERS

Quotas: “supply shortage” = higher price on
imports = higher demand on domestic goods
TRADE BARRIERS
Embargoes: NO trade at all!

Trade Barriers
Factor Group 2
 In the past two decades, the United States has had several
embargoes against Iran because of Iran’s involvement with
terrorism.
 When Saudi Arabia wanted to join the World Trade
Organization (WTO), it lifted its long-standing embargo
against all trade with Israel.
 The Free Trade Agreement (FTA) signed by the United
States and Israel eliminated all duties and other restrictions
on trade in goods between the two countries.
Trade Barriers

Factors of Trade &
Economic Growth
Iran
Israel
Saudi Arabia
Effected by
Trade Barriers
The U.S. has had
several embargoes
against Iran because
of Iran’s involvement
with terrorism.
A trade agreement
was signed by the
U.S. and Israel that
eliminated
restrictions on trade
between the
countries.
For years, Saudi
Arabia had an
embargo against all
trade with Israel.
Turn to an elbow partner to
discuss which of the three
countries was affected
positively by the presence or
absence of a trade barrier.
Why?
Investments in
Human Capital

Human Capital:
Education
and training
Investments in
Human Capital

Education and the abilities it develops create
a smarter and more productive workforce,
which leads to greater economic growth.
Investment in Human Capital
Factor Group 4
 Israel has highly educated workers and a large number of scientists
and engineers.
 Iran has high unemployment because young Iranians have not been
trained to do jobs.
 Saudi Arabia is in the early stages of revising its entire education
system.
 The educational system in Iran is weak and many educated Iranians
are seeking work in other countries.
 Israel invests in its schools and has a literacy rate of 97%, the highest
in the Middle East.
 For the past several decades, Saudi Arabia has sent university
students abroad for education.
 Iran has begun to raise the priority of education and adult literacy by
building new schools and expanding public colleges.
Investment in
Human Capital

Factors of Trade &
Economic Growth
Makes
Investments
in Human
Capital
Iran
Israel
High
Has highly
unemployment due
to lack of training; a educated workers;
invests in schools;
weak education
has the highest
system; it has started
to raise the priority literacy rate among
Middle East
of education and
countries (97%)
literacy
Saudi Arabia
Is revising its
education system;
has sent university
students abroad to
study
Think, Pair, Share
Examine the table below. In which
country would you most prefer to live?
Why? Least prefer? Why?
Literacy
GDP per capita
(person)
Life
Expectanc
y
Unemployment
Rate
Afghanistan
38%
$2,000
51
35%
Iran
87%
$16,500
71
23%
Israel
98%
$33,400
82
12%
Lebanon
94%
$17,900
77
17%
Saudi Arabia
95%
$52,800
75
28%
Country
There is a relationship between
literacy and human capital in terms
of people’s ability to produce income
and have a better life.
Literacy
GDP per capita
(person)
Life
Expectancy
Unemployment
Rate
Afghanistan
38%
$2,000
51
35%
Iran
87%
$16,500
71
23%
Israel
98%
$33,400
82
12%
Lebanon
94%
$17,900
77
17%
Saudi Arabia
95%
$52,800
75
28%
Country
Based on current data taken from the CIA World Factbook in 2015
Human Capital, Literacy Rate,
and Standard of Living

If you can read, you can learn. If you can learn, you
can improve your work skills, and get a better job
that pays a better salary. If you have a better salary,
you can improve your standard of living.
A country that improves the literacy rate among its
citizens will improve the standard of living within
that country and improve its economy. Educated and
skilled workers are an important factor in a country’s
economic growth.
Investment in Capital

Capital: Factories,
Machinery,
Technology, Roads,
Equipment, etc.
Investment in capital helps economic growth
by providing workers with the best and
newest tools which makes them more
productive, and increases a country’s GDP.
Investment in Capital
Factor Group 1
 Israel has a modern, well developed infrastructure and
continues to upgrade it by investing in services like mass
transit (transportation) systems and new highways.
 Saudi Arabia is planning a massive, multi-billion-dollar
investment in a railway project that will move shipments to
and from its ports faster.
 While Iran has generous oil reserves, it does not produce as
much oil as it could because the country invests only a small
percentage of its oil profits into improving oil facilities and the
country’s infrastructure (organization).
 Saudi Arabia has built factories and increased spending on
the development of infrastructure (organization).
 Iran has started to invest in its telecommunications networks,
roads, and machinery.
Investment in Capital

Factors of Trade &
Economic Growth
Makes
Investments
in Capital
Iran
Israel
Saudi Arabia
Invests only a small
% of oil profits into
improving facilities
and organization; has
started to invest in
telecommunication
systems, roads, and
machinery
Has modern, welldeveloped
infrastructure
(organization) and
improves it by
investing in transit
systems and new
highways
Is planning a huge
investment in a
railway system to
move shipments to
ports faster; has built
factories and
increased spending
for infrastructure
(organization)
Turn to an elbow partner to
discuss which of the three
countries has made the most
improvement in the
investment of capital (human
and physical). Why?
Natural Resources

Natural resources are materials or
substances that occur in nature and can
be used for economic gain.
Natural resources are the fuel for
industry and a source of income
when exported to other countries.
Natural Resources
Factor Group 7
 Saudi Arabia’s economy is anchored in oil. Money from oil
transformed Saudi Arabia from a poor society to a very
wealthy society.
 Oil is what keeps the economy and GDP of Iran growing,
providing the majority of government revenues.
 Despite being in the otherwise oil-rich Middle East, Israel
is low on natural resources. The country's economic
stability is largely due to its advanced high-tech region
and agriculture, rather than its production of raw
materials.
Natural Resources

Factors of Trade &
Economic Growth
Presence
of natural
resources
Iran
Israel
Saudi Arabia
Oil provides the
majority of
revenue (money).
This could be
considered a
negative too.
Why?
Israel is low on
natural resources
(but its economy
is successful
because of its
investment in
capital and hightech industries)
Saudi Arabia’s
economy is
dependent on oil.
This could be
considered a
negative too.
Why?
Entrepreneur: someone who has an idea for a good
or service and takes the risks to produce it. They
use human, capital, and natural resources to
produce their product.
Entrepreneurship creates jobs and better
materials, products, technologies, etc.
The more entrepreneurs a country has,
the higher the country’s GDP
Entrepreneurship
Factor Group 5
 Israel’s policies, including its tax structure, encourage the growth of
small businesses.
 To start a new business or develop a new product, people in Iran
have to overcome many obstacles like getting credit from a bank.
 Saudi Arabia has cut down the government requirements to start a
business.
 Israel has a Technological Incubator Program for people in order to
promote the development of innovative technology.
 Israel has programs to train immigrants, Arab-Israelis, and people
over 55 to start their own business.
 Since there is little training available in Iran, new business owners
have a difficult time hiring good managers.
 International investors have started an institute in Saudi Arabia to
support new business owners and give them a place to start a
business.
Entrepreneurship

Factors of Trade &
Economic Growth
Encourages
Entrepreneurship
Iran
Israel
Saudi Arabia
Policies encourage
Has cut down
government
requirements to
start a business;
has an institute to
support new
business owners
Entrepreneurship is
the growth of small
growing, but people
have to overcome business; it promotes
the development of
many obstacles to
innovative
start a new business;
technology; has
there are new gov’t
programs supporting training programs
entrepreneurship, for people starting a
but still little training
new business
Gross Domestic
Product (GDP)

Economic growth in a country is measured
by the country’s Gross Domestic Product
(GDP) in one year
Gross Domestic
Product (GDP)

GDP = the total of goods and services
produced in one year within a country
GDP per capita is a measure of the total
output of a country that takes the GDP
and divides it by the number of people
in the country.
Economic growth is usually measured by
calculating the percent increase in GDP
from one year to the next. This is known
as the GDP Growth Rate.
GDP per capita and GDP growth rate can be
useful when comparing one country to
another because it shows the relative
performance of the countries.
GDP Review Videos [select one]

Gross Domestic Produce: The
Economic Lowdown [7:51]
What Exactly is GDP? [from
economics unit]
Get with a seat partner.
Each partner should
share a 1-2 sentence
explanation of GDP.
Gross Domestic Product (GDP)
Factor Group 6






The average Israeli citizen makes $33,400
The average Iranian citizen makes $16,500
The average Saudi citizen makes $52,800
The real growth rate for Israel in 2014 was 2.5%
The real growth rate for Iran in 2014 was 1.5%
The real growth rate for Saudi Arabia in 2014 was
3.6%
Gross Domestic
Product (GDP)

Factors of Trade &
Economic Growth
Iran
Israel
Saudi Arabia
GDP Per
GDP Per
Capita: $33,400
GDP Per
Capita: $52,800
GDP Growth
Rate: 2.5%
GDP Growth
Rate: 3.6%
GDP Per Capita Capita: $16,500
& GDP Growth
Rate
GDP Growth
Rate: 1.5%
Based on current data taken from the CIA World Factbook in 2015
Based on GDP per capita and growth
rate, which country has the strongest
economy? Why? Weakest? Why?

Factors of Trade &
Economic Growth
Iran
Israel
Saudi Arabia
GDP Per
GDP Per
Capita: $33,400
GDP Per
Capita: $52,800
GDP Growth
Rate: 2.5%
GDP Growth
Rate: 3.6%
GDP Per Capita Capita: $16,500
& GDP Growth
Rate
GDP Growth
Rate: 1.5%
Based on current data taken from the CIA World Factbook in 2015
Economic Factors

Use the Index of Economic Freedom
to compare the three countries of
Southwest (Middle East) to the U.S.
http://www.heritage.org/index/ranking
Think, Pair, Share:
Answer the four questions from the Factors
of Trade & Economic Growth Activity
1. Based on all economic factors, which country do you
think has the strongest economy? Why?
2. Based on all economic factors, which country do you
think has the weakest economy? Why?
3. What could Iran do to increase its GDP Per Capita and
GDP Growth Rate? Why?
4. Which factor of trade and economic growth do you
think is the most important? Why?
Summarizer
