Limits Flashcards
1
Q
How can geographical factors limit growth
A
Being land locked so isolated from markets abroad
Producers can’t sell products easily
2
Q
What historical factor limits growth?
A
Colonialism
Now neo-colonialism leads to dependency
3
Q
What is the savings gap/effects?
A
- Savings ratio is low as MPC is high
- Low investment
- No additions to capital stock (capital accumulation)
- Low GDP
4
Q
Examples of countries with primary product dependency
A
Nigeria - oil
Kenya - tea
Ghana - gold
5
Q
Problems of primary product dependency?
A
- Price fluctuations so revenue fluctuations
- Shortage for domestic consumption
- Finite supply of raw materials (hard commodities)
- Prebisch-Singer hypothesis
6
Q
What is the prebisch-singer hypothesis?
A
Demand for primary products is income inelastic but manufactured goods is elastic.
- as incomes rise demand for manufactured goods rises more and prices rise more
- terms of trade falls so country must export more to gain a given amount of imports
- deterioration in current account
7
Q
What does corruption lead to?
A
- inefficient allocation of resources
- decrease in fdi
- capital flight
8
Q
What is the effect of low education levels?
A
- productivity will be low
- deterrent to fdi
- low occupational mobility of labour
9
Q
Example of a country which grew due to Primary Product Dependency.
A
Botswana and diamonds.
Highest average economic growth in the world at 9%
