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.
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