Evaluate a constraint on Economic growth and development. (8)

Definition: Economic growth is a long-term expansion of the productive potential of the economy.

Chain of Argument:

↑Primary Product dependency → ↓Terms of trade + ↑susceptible to price fluctuations, protectionism and natural disasters → ↓(X-M) → ↓AD

Evaluation

Developing countries may have a comparative advantage in their primary product. Some countries have developed on the basis of their primary products.

Value vs Volume of exports.

Application

Botswana has developed through diamond production. Debswana, a Botswana diamond company, is the largest corporate responsibility contributor to the socio-economic development of Botswana. Diamonds account for 45% of Botswana government revenue.

90% of Angola’s exports are oil.

Chile experienced a 50% price fall in copper between 2008 and 2009.