SS7E7a,b,c.d The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran

SS7E7a,b,c.d

The student will describe factors that influence economic growth and

examine their presence or absence in Israel, Saudi Arabia, and Iran

a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP)

• Gross Domestic Product: the value of all goods and services produced in a nation in a given year

• Human capital: the knowledge and skills that make it possible for workers to earn a living producing goods or services.

• More skills and education = better able to work without mistakes and learn new skills as technology changes


• Companies that invest in training and education for their workers usually earn more profits.

• Also more satisfied workers.

• Good companies try to make working conditions safe and efficient so their workers can do their jobs without risk.


• Wealthy countries have a much higher per capita GDP than do developing or underdeveloped countries.

• Countries where training and education are more easily available often have higher production levels of goods and services (and higher GDPs) than countries that do not invest in human capital.


• Countries in SW Asia have widely different gross domestic product levels.

• Countries that make it possible for workers to receive training and education tend to be wealthier than those that do not.


• Israel has wide access to education and an economy that depends on technology industries to make up for the lack of natural resources.

• Many Israelis work in industries related to medical technology, agricultural technology, mining, and electronics.


• They also have highly developed service industries ( businesses that supply the needs of the rest of the working population).

• Israel’s GDP is very high because they have invested heavily in their human capital.


• Saudi Arabia’s main industry is as an exporter of oil (petroleum) and petroleum products.

• The technology of the oil industry is complicated and requires a well-trained and educated work force.

• Saudi Arabia also has modern communications and transportation systems.


• They also have enormous building projects.

• All of these require investments in human capital.

• Some Saudi citizens still practice traditional economic activities such as farming and herding animals.

• Due to the world demand for oil, Saudi Arabia’s GDP is high.


• Iran = world’s 5th largest producer of oil.

• Oil wealth has led to the use of advanced technology that has required highly trained workers.

• Iran has always had highly regarded schools and universities that have meant educated workers were available for industry.


• However, in recent years the Iranian government has not always done a good job of regulating the parts of the economy that are under government control.

• Iran- GDP = $10,600 Lit. Rate 77%• Israel – GDP = $25,800 Lit. Rate 97.1%• Saudi Arabia – GDP = 23,200

Lit. Rate 78.8%


• Discuss: Relate oil wealth, GDP, and literacy. Why if Iran is so oil wealthy does it have a lower GDP. How does the literacy rate affect the GDP? Israel? Saudi Arabia?

• Iran- GDP = $10,600 Lit. Rate 77%• Israel – GDP = $25,800 Lit. Rate 97.1%• Saudi Arabia – GDP = 23,200

Lit. Rate 78.8%


• Questions

• What is meant by “human capital”?

• Why have the Israelis made a big investment in human capital?


• Questions

• Why would the Saudi oil industry need a large investment in human capital?


• Questions

• What is one of Iran’s biggest problems with their state-run oil industry?


• Questions

• If a country does not invest in its human capital, how can it affect the country’s gross domestic product?

b. Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP)

• Capital goods are important to economic growth

• Use of advanced technologies increases production and makes that production more efficient.

• Producing more goods faster and more efficiently leads to economic growth and greater profits (and a greater GDP).


• Israel: invested heavily in capital goods (needed for their technology and industrial production as well as for their advanced communication systems).

• Israel has also invested heavily in technology involved in the defense industry.


• Saudi Arabia: invested heavily in capital goods, especially in technology related to oil production, transportation, and communication

• Iran: invested greatly in capital goods related to oil production, technology and communication.

• Iran also spends a great deal on its defense industry.


• Questions:

• What are capital goods?

• Name three things in which Israel has invested heavily.

c. Explain the role of oil in these countries’ economies

• Natural resources are the raw materials a country has that make life and production of goods possible.

• Land, water, rich soil, and minerals are all types of natural resources.

• In SW Asia one important resource is oil.

• Some natural resources can be replaced when they are used like trees (renewable).


• Other resources like coal and oil cannot be replaced once they are used (nonrenewable)

• Oil and natural gas are fossil fuels.

• They were created when plants and animals that lived centuries ago decayed underground.

• Natural gas is also nonrenewable.

• Most of the industrial nations depend on oil.


• The U.S imports nearly half of all the oil it uses ( almost 18 million barrels a day)

• Other nations do the same.

• Some other sources of power are also used such as coal, wind power and nuclear power.

• Since so many countries rely on oil, countries in the Middle East with large reserves of oil have steady markets for all the oil and natural gas they can produce.


• Many of these countries have become very rich in the last 50 years as the world’s demand for oil and gas has increased.

• Saudi Arabia and Iran are two of the world’s largest producers of oil.

• Over half of the world’s known supplies of oil are found in countries in the Middle East.


• Israel has few natural resources and practically no oil at all.

• Israel has a highly developed industrial economy so the price of oil has a huge impact on the Israeli economy.

• Since they need oil for their industries and do not have any to speak of, Israel has had to find other natural resources to develop in order to help their economy grow.


• Minerals, including phosphates, are mined commercially in Israel.

• Salts are also taken from the Dead Sea.

• Israel’s economy depends in large part on technology rather than on the development of natural resources.

• This means that Israel always has to purchase oil to keep their industries going.


• Other than oil, Saudi Arabia has few natural resources.

• The production of oil and natural gas (petrochemicals) make up the majority of Saudi Arabia’s economic wealth.

• Saudi Arabia is very influential in the world economy and in OPEC due to its vast oil reserves.


• They have been able to modernize agriculture by spending billions of dollars on irrigation and desalination technology.

• Modern cities exist where there was once remote desert land.

• They have modernized roads, schools, airports, and communication systems.


• NOTE:

• The oil wealth of Saudi Arabia technically belongs to the royal family, the al-Saudis.

• However they have spent enormous sums of money to improve the standard of living for their people.

• Saudi Arabia has gone from being a “desert kingdom” to a modern nation in less than 100 years.


• Iran’s most valuable natural resource is oil.

• They also have rich farmland and access to water for irrigation and farming.

• Oil and petroleum products are the biggest contributors to Iran’s varied economy.

• 85% of the government’s money comes from the sale of oil and petrochemicals on the world market.


• Many Iranians work in other industries as well with almost 1/3 engaged in agriculture.

• Political problems in recent years have led to economic difficulties in spite of their vast supply of oil.

• Iran is a member of OPEC and benefits from that organization’s decision to keep the price of oil on the world market at high levels.


• Questions:

• Why are oil and gas such valuable natural resources?


• Questions:

• How much of the oil used by the U.S. has to be imported every day?


• Questions:

• How has the Saudi government used its national wealth to change the country?


• Questions:

• How do Iran and Saudi Arabia benefit from belonging to OPEC?


• Questions:

• How has Israel’s lack of oil affected that country’s economy?

d. Describe the role of entrepreneurship

• Entrepreneurs are creative, original thinkers who are willing to rake risks to create new businesses and products.

• They think of new ways to combine productive resources (natural, human, and capital) to produce goods and services that they expect to sell for a price high enough to cover production costs.


• Entrepreneurs are willing to risk their own money to produce these new goods and services in the hope that they will earn a profit.

• Success is not guaranteed; not all entrepreneurs will make a profit.

• Many are not successful.

• Only about 50% of new businesses are still operating 3 years after they begin.


• Question:

• What is an entrepreneur?

Documents

SS7E7a,b,c.d The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran