1. Economics in the Middle East
Unit 3

2. Standards
SS7E6a. Explain how specialization encourages trade between countries.
SS7E6b. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos.
SS7E6d. Explain why international trade requires a system for exchanging currencies between nations.

3. SS7E6a. Explain how specialization encourages trade between countries.
What is specialization?
When a country or company focuses on producing a certain type of good or service.
The types of natural, human, and capital resources determine what a country specializes in.
For example, the Middle Eastern countries near the Persian Gulf specialize in producing and exporting oil.

4. How does it encourage trade?
When a country specializes it means they spend time and money on making the good or service the best they can. Purchasing this from them ensures you are getting quality products or services.
It also helps to have something to return or export to their country.

5. What are trade barriers?
SS7E6b. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos.
What are trade barriers?
A trade barrier is any law or practice that a government uses to limit free trade between countries.
Tariffs – a tax on imported goods
Quotas – a limit on the quantity of goods
Embargos – refusal to trade with another country

6. Tariffs Think of the three Ts (Tax + Trade = Tariff)
Governments of countries do this for two reasons:
To make money by charging foreign companies or countries to trade
To help domestic companies stay competitive with foreign companies by making the foreign goods more expensive

7. Quota
Sometimes is it called an import quota because it refers to the number of imported goods in a given period of time.
The United States might limit the number of Japanese automobiles we import into the country so that our domestic companies like Ford or GM can stay in business with the competition.

8. Embargo
Think of an embargo as a way to punish other countries economically without having to go to war.
In the 1970’s OPEC nations tried to punish the US for supporting the country of Israel by stopping the producing of oil which increased the price and hurt our economy.
In the early 1990’s countries refused to trade with Iraq following the invasion of Kuwait .

9. SS7E6d. Explain why international trade requires a system for exchanging currencies between nations.
Currency exchange is the trading of one form of money for another so that international trade can take place.
Imagine what would happen if we didn’t have this and no one would take another countries money…