Que.1. what is per capita income of Ethiopia as per the recent report?
(Source)
GDP per Capita in Ethiopia averaged 389.31 USD from 1981 until 2021, reaching an all-time high of
834.96 USD in 2021 and a record low of 215.64 USD in 1992.
[Link] the importance of macroeconomic policy for a country.
The evidence suggests that macroeconomic policy can successfully contribute to growth rebalancing.
Policy measures not only can affect aggregate demand directly, but can also affect it indirectly via their
“microeconomic” impacts on private sector behavior.
In broad terms, the goal macroeconomic policy is to provide stable economic environment that is
conducive to fostering strong and sustainable economic growth, on which the creation jobs, wealth and
improved living standards depend. The evidence suggests that macroeconomic policy can successfully
contribute to growth rebalancing. Policy measures not only can affect aggregate demand directly, but
can also affect it indirectly via their “microeconomic” impacts on private sector behavior.
Que.3. Explain the contribution of agriculture, manufacturing, and service sector in Ethiopia GDP-1
Agriculture contributes the principal source income and employment for the majority of the production.
Greater proportion of the foreign exchange country earns also comes from this sector. The sector
accounted about 68.6% of GDP during the imperial period and about 56% during the last regime.
Manufacturing sector is small even by African standards, for over 20 years, the share of manufacturing
value added in total, total value added in Ethiopia has varied between 4&5 per cent.
The service sector also known as the tertiary [Link] the third tire in the three sector economy. Instead
of product production, this sector produces service maintenance and repairs, training, or consulting.
Que. [Link] in short monetary and fiscal policies pin point their role in economic development and
their limitation as well.
Monetary policy refers to the action of central banks to achieve macroeconomic policy objectives such
as: price stability, full employment, and stable economic growth.
Fiscal policy refers to the tax and expending policies of the federal government. While monetary policy
affects income and expenditures-particularly in the private sector by influencing the cost and availability
of money.
The fiscal policy affects income and spending through its effects on the amount, character and timing of
government revenue and expenditures.
Limitation of monetary policy means that it cannot solve all economic problems, the governor added.
The first limitation is that since monetary policy has only one instrument, the Bank cannot use interest
rates to target more than one variable.
Fiscal policy can conflict with monetary policy in certain circumstance. Government
Spending and taxation cuts have consequences for the government deficit; there are also limits to the
utility of stimulating a globalized economic system.
Que 5. GDP is not the actual measure of a national income. How should the net income of country be
calculated?
National income is the total income acquired by the occupants of the country in the production of goods
and service both, Domestically as well as [Link] is the net result of all the economic activities
undertaken by a country during a period one year.
What are the 3 methods of calculating national income?
The national income of a country can be measured by three alternative methods:
• Product Method.
• Income Method.
• Expenditure Method.
What is a country's net income?
Net national income (NNI) is defined as gross national income minus the depreciation of fixed capital
assets (dwellings, buildings, machinery, transport equipment and physical infrastructure) through wear
and tear and obsolescence.
To measure the national income of a country, the most and widely used national income concepts are
below.
Gross Domestic product (GDP): Gross Domestic product is the total money value of goods and services
produced within the country during an accounting period.
Gross national product (GNP) GNP is the value of all final goods and services produced by a country
during a period of one year, while calculating GNP we include income from a foreign country.
GNP=GDP +exports-imports.
Que [Link] is relationship between GDP and economic welfare.
GDP is often used as an index to measure the welfare of people, welfare here refers to the sense of
material being amongst people. The welfare of people depends up on the per head availability of goods
and [Link] means that higher GDP is good for a country, as it indicates greater welfare the people.
In general, when the GDP growth rate shows rising economic productivity, the value of money in
circulation increases. This is because each unit of currency can subsequently be exchanged for more
valuable goods and services.
Que. 7. Derive the saving function from the consumption.
Saving function can be derived from the consumption function.
S=f(y)
Therefore Y=c+s
Therefore s=y-c
Thus saving the amount of income which is not spent on consumption
Therefore c=c+cy
Therefore s=y-c-cy
S=-c+y(1-c)
Where c⃗MPc