Factors that Influence Economic Growth

In

Israel, Saudi Arabia, and Iran

The Four Factors that Influence Economic Growth

• Capital Goods

• Human Capital

• Natural Resources - Oil

• Entrepreneurship

What is???

• Capital Goods – Resources such as factories, machinery, and tools that people use to make other goods.

• More and better capital goods enable workers to make products more quickly and more cheaply.

What is???

• Human Capital – The knowledge and skills that allow workers to produce goods and services and earn an income.

• Examples: education, training, workers

What happens to a country’s GDP when they invest in capital

goods and human capital?

02468

10121416

No/Low Investment in Capital Goods

High Investment in Capital Goods

No/Low Investment in Human Capital

High Investment in Human Capital

Why?• When there are more capital goods, workers

become more efficient and productive. When more goods are produced the economy grows.

• Education and training helps workers learn new skills as jobs change. People who invest in their human capital by increasing their knowledge and skills earn more money. Especially when it comes to jobs in the technology field.

How do those factors effect..

Israel

Saudi Arabia

Iran

Israel

• One of the most advanced countries in Southwest Asia in economic and industrial development

• Ranks 3rd in the world in the number of citizens who hold university degrees

• Development of cutting-edge technologies in software, communications and the life sciences

Saudi Arabia

• Economy is petroleum-based• Over 25% of annual budget is for

education.• The system provides students with free

education, books and health services to every Saudi.

• The educational system provides quality instruction in diverse fields of modern and traditional arts and sciences

Iran• Leading manufacturer in the fields of

transportations, construction materials, home appliances, food and agricultural goods, information technology, power and petrochemicals.

• Economic inefficiency and insufficient investment have prompted an increasing number of educated Iranians to seek employment overseas.

• Only 5% of GDP is spent on education.

Israel

Saudi Arabia

Iran

What Role Does Oil Play?

Israel

Oil does not play a major role in economy. Their economic growth is based on a combination of cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables).

Saudi Arabia

Oil makes up 80% of the country’s exports and comprises about 45% of Saudi Arabia's gross domestic product. They are the largest exporter of petroleum in the world and officially has about 260 billion barrels of oil reserves.

Iran Oil makes up 85% of the governments

revenues. High oil prices in recent years have helped Iran to earn nearly $70 billion in foreign exchange reserves. Iran is OPEC’s (Organization of Petroleum Exporting Countries) second-largest exporter after Saudi Arabia, and is the fourth-largest exporter of crude oil.

What is the role of entrepreneurs?

• Israel: The second-largest number of start-up companies in the world (after the United States) and is a free market economy.

• Saudi Arabia: Entrepreneurs are not a huge factor in the growth of the economy. Most private-owned companies are supported by generous government financing and incentive programs.

• Iran: Entrepreneurs do not play a big role in the economy. There are some small-scale private trading companies, workshops, and farming businesses.

How do literacy rates effect standard of living?

DefinitionLiteracy Rate:

The number of people over the age of 15 that can read and write.

Standard of Living:

Quality of life based on the amount of goods and services available to people. People who have a high standard of living have enough food and housing, good transportation and communications, and access to schools and health care. They also have a high literacy rate.

Literacy Rates & Standards of Living

• Israel: 97.1% literacy rate; standard of living is good but a lot of people still live in poverty.

• Saudi Arabia: 78.8% literacy rate; medium standard of living; plagued by high unemployment rates due to a high amount of unskilled workers.

• Iran: 77% literacy rate; high unemployment rates, low standard of living