Which of the following best explains the GDP growth patterns in Mexico between 1994 and 2010?

• A. The implementation of NAFTA, increased foreign investment, and economic reforms led to periods of growth, while external shocks such as the 1994 peso crisis and the 2008 global financial crisis caused slowdowns.
• B. Mexico's GDP growth was primarily driven by agricultural expansion and isolation from international trade agreements.
• C. GDP growth in Mexico was mainly due to a decline in exports and a reduction in foreign direct investment.
• D. Consistent government spending and avoidance of any financial crises resulted in uninterrupted GDP growth throughout the period.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the context of Mexico's GDP growth between 1994 and 2010 by identifying key economic events during this period, such as the implementation of NAFTA (North American Free Trade Agreement), major economic reforms, and external shocks like the 1994 peso crisis and the 2008 global financial crisis.
2. Step 2: Recognize that GDP growth is influenced by factors such as trade agreements, foreign direct investment (FDI), government policies, and external economic shocks. NAFTA, for example, increased trade and investment flows between Mexico, the US, and Canada, which typically promotes growth.
3. Step 3: Analyze how external shocks like the 1994 peso crisis and the 2008 global financial crisis can cause economic slowdowns by reducing investment, consumption, and exports, which negatively impact GDP growth.
4. Step 4: Compare the given answer choices by evaluating whether they align with the known economic history and data of Mexico during this period. For instance, agricultural expansion and isolation from trade agreements are less consistent with Mexico's actual experience of increased trade openness under NAFTA.
5. Step 5: Conclude that the best explanation for Mexico's GDP growth patterns is the combination of positive influences from NAFTA and economic reforms, alongside negative impacts from external shocks, as this reflects the real-world economic dynamics affecting Mexico between 1994 and 2010.