Gross Domestic Product

Question 1

GDP definition and characteristics

Answer 1

*Gross Domestic Product (GDP) is the total monetary value of all final goods and services produced within a country in a given period (usually a year).
*Final goods only: Intermediate goods are excluded to avoid double counting.
*Geographical boundary: Includes production within Ethiopia, regardless of
producer nationality.
*It doesn’t count….used goods, financial transactions, transfer payments

Question 2

Measuring approaches of GDP

Answer 2

• Income approach
• Expenditure approach
• Value added approach

Question 3

Expenditure approach

Answer 3

GDP = C + I + G + (X – M)

Question 4

types of consumption

Answer 4

• Induced
• Autonomous

Question 5

Consumption includes

Answer 5

durable goods (cars, furniture),
nondurable goods (food, clothing), and
services (education, healthcare)

Question 6

Autonomous Cosumption

Answer 6

-does not depend on the level of income
-minimum level of consumption for survival

Question 7

Induced

Answer 7

• depends on income

Question 8

Consumption formula

Answer 8

C=a+bY or C=A+I

Question 9

Investment

Answer 9

money businesses spend to buy things that help them produce more in the future.

Question 10

Gov’t expenditure types

Answer 10

• Capital
• Recurrent

Question 11

Capital Expenditure

Answer 11

Spending by the government on long-term assets that increase the country’s productive capacity.

Question 12

Recurrent Expenditure

Answer 12

Regular, ongoing spending by the government to run daily operations and services.

Question 13

Net Export (X-M) situations

Answer 13

X>M; NE=+ve…Trade Surplus
X=M; NE=0…Balanced Trade
X<M; NE=-ve…Trade Deficit