Grade 12 results are out. Where to check yours

Unit notes and practice questions

Grade 10 Economics unit 7: The Ethiopian Economy

Everything here is for unit 7 of the Grade 10 Economics textbook: what the chapter covers, the short notes, practice questions with their answers, and the lesson video where one exists.

Get it on Google Play
5
Cards
10
Practice questions on unit 7
134–160
The textbook pages for unit 7

What unit 7 covers

  1. 1.Compnents of Gross Domostic Product (GDP)
  2. 2.Real GDP Vs Nomail GDP
  3. 3.The Agricultural Secotor in the Ethiopian Economy
  4. 4.The Industrial Sector in the Ethiopian Economy
  5. 5.The Service Sector in the Ethiopian Economy
  6. 6.Agriculture versus Industrial Development

Short notes for unit 7

The cards filed under this chapter on the Grade 10 Economics page. Open one at a time.

Farming SystemCoverage and ShareDistinct Features
Smallholder farming> 90% agricultural output, 95% crop areaMixed farming, over 86% cultivate under 2 hectares
Pastoral system40% land area, 5.5 million peopleArid lowlands, livestock reliant, nomadic movement
Commercial farming< 10% agricultural output, 5% crop areaMechanized or irrigated, large state or private farms

When you use it

Use to distinguish the three main categories of agricultural production systems in Ethiopia.

Watch out

Smallholder farming dominates output and land use, while pastoral farming covers 40% of the land area in arid lowlands.

Drafted from Grade 10 Economics, pages 134-160, then checked twice before it went up

GDP Deflator=Nominal GDPReal GDP×100\text{GDP Deflator} = \frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100
GDP Deflator\text{GDP Deflator}
Measure of the price level relative to the base yeardimensionlessdimensionless
Nominal GDP\text{Nominal GDP}
Output valued at current year pricesETBETB
Real GDP\text{Real GDP}
Output valued at constant base year pricesETBETB

When you use it

Use this formula to measure the average price level and isolate price changes from output changes.

Watch out

In the designated base year, Nominal GDP equals Real GDP, so the GDP Deflator is always exactly 100.

Drafted from Grade 10 Economics, pages 134-160, then checked twice before it went up

Y=C+I+G+NXY = C + I + G + NX
YY
Gross Domestic Product (GDP)ETBETB
CC
Consumption expenditure by householdsETBETB
II
Investment in capital goods, inventories, and structuresETBETB
GG
Government Purchases of goods and servicesETBETB
NXNX
Net Exports (Exports minus Imports)ETBETB

When you use it

Use this identity to calculate total Gross Domestic Product from the expenditure approach.

Watch out

Net Exports equals Exports minus Imports. Subtract imports because they are already included inside domestic spending components.

Drafted from Grade 10 Economics, pages 134-160, then checked twice before it went up

Inflation Rate=Deflator2−Deflator1Deflator1×100\text{Inflation Rate} = \frac{\text{Deflator}_2 - \text{Deflator}_1}{\text{Deflator}_1} \times 100
Inflation Rate\text{Inflation Rate}
Percentage change in the price level%\%
Deflator2\text{Deflator}_2
GDP Deflator in the current yeardimensionlessdimensionless
Deflator1\text{Deflator}_1
GDP Deflator in the preceding yeardimensionlessdimensionless

When you use it

Use this equation to compute the annual inflation rate between two consecutive years using the GDP deflator.

Watch out

Always divide by the initial year deflator, not the current year deflator.

Drafted from Grade 10 Economics, pages 134-160, then checked twice before it went up

When you use it

Use when sorting national expenditures into Consumption, Investment, and Government Purchases.

Watch out

Transfer payments (like pensions or unemployment aid) are excluded from Government Purchases because they lack current production. New residential housing is classified under Investment, not Consumption.

Drafted from Grade 10 Economics, pages 134-160, then checked twice before it went up

Practice questions on unit 7

10 multiple-choice questions written against this chapter, each with its answer and the reason. Try one before you open the answer.

Question 1

Under GDP expenditure accounting, which of the following household purchases is classified as investment rather than consumption?

  1. A.The purchase of a new house
  2. B.Spending on medical services
  3. C.Spending on school tuition and books
  4. D.The purchase of a new television
Show the answer and why

Answer: A The purchase of a new house

Why

By convention in national income accounting, the purchase of a new house is the only household expenditure categorized as investment rather than consumption.

Question 2

Why are government transfer payments, such as pension benefits or unemployment support, excluded from government purchases in GDP?

  1. A.They are not made in exchange for a currently produced good or service.
  2. B.They are counted under household investment spending instead.
  3. C.They are only paid to foreign citizens living abroad.
  4. D.They directly reduce the total tax collection of the nation.
Show the answer and why

Answer: A They are not made in exchange for a currently produced good or service.

Why

Transfer payments alter household income, but because they are not payments for currently produced goods or services, they are not included in GDP.

Question 3

Which farming system is the dominant system in Ethiopia, producing more than 90 percent of total agricultural output?

  1. A.The smallholder farming system
  2. B.The pastoral nomadic system
  3. C.The state farm enterprise system
  4. D.The modern commercial farming system
Show the answer and why

Answer: A The smallholder farming system

Why

The smallholder farming system is the dominant system in Ethiopia, accounting for over 90 percent of agricultural production and about 95 percent of crop area.

Question 4

What is the development strategy adopted by Ethiopia that considers the agricultural sector as the leading force to develop industry?

  1. A.ADLI (Agricultural Development Led Industrialization)
  2. B.Heavy Industry Priority Strategy
  3. C.Import Substitution Strategy
  4. D.Service Sector Expansion Model
Show the answer and why

Answer: A ADLI (Agricultural Development Led Industrialization)

Why

ADLI (Agricultural Development Led Industrialization) views agriculture as the dynamic leading sector that provides raw materials, food, and surplus to drive industrial growth.

Question 5

If nominal GDP rises from one year to the next while real GDP remains unchanged, what has happened in the economy?

  1. A.The prices of goods and services increased, but output stayed the same.
  2. B.The total physical quantity of production increased.
  3. C.Both prices and output decreased by equal percentages.
  4. D.The population decreased while productivity increased.
Show the answer and why

Answer: A The prices of goods and services increased, but output stayed the same.

Why

Real GDP measures output using constant base-year prices. If nominal GDP rises while real GDP stays constant, the increase is entirely due to higher prices.

Question 6

In a given year, an economy has a nominal GDP of 60,000 birr and a real GDP of 40,000 birr. What is the GDP deflator for that year?

  1. A.150
  2. B.67
  3. C.100
  4. D.240
Show the answer and why

Answer: A 150

Why

The GDP deflator is calculated as (Nominal GDP / Real GDP) * 100. Therefore, (60,000 / 40,000) * 100 = 1.5 * 100 = 150.

Question 7

Which sub-sector contributes the largest share (about 65 percent) to Ethiopia's agricultural GDP?

  1. A.Crop production
  2. B.Animal husbandry
  3. C.Forestry
  4. D.Fishery
Show the answer and why

Answer: A Crop production

Why

Crop production accounts for about 65% of agricultural GDP in Ethiopia, animal husbandry contributes 25%, and forestry and fishing make up the remaining 10%.

Question 8

Within the Ethiopian manufacturing sub-sector, which industry generates the largest share of foreign exchange earnings?

  1. A.Textiles
  2. B.Food and beverages
  3. C.Leather and footwear
  4. D.Wood and furniture
Show the answer and why

Answer: A Textiles

Why

Textiles generate 41.5% of the manufacturing sector's foreign exchange earnings, followed by food and beverages at 32.9%.

Question 9

A resident in Addis Ababa purchases an imported automobile from Japan for 400,000 birr. How does this transaction affect Ethiopia's GDP components and total GDP?

  1. A.Consumption rises by 400,000 birr, net exports fall by 400,000 birr, and total GDP remains unchanged.
  2. B.Net exports fall by 400,000 birr, and total GDP falls by 400,000 birr.
  3. C.Investment rises by 400,000 birr, net exports fall by 400,000 birr, and total GDP rises.
  4. D.Consumption rises by 400,000 birr, net exports rise by 400,000 birr, and total GDP rises by 800,000 birr.
Show the answer and why

Answer: A Consumption rises by 400,000 birr, net exports fall by 400,000 birr, and total GDP remains unchanged.

Why

Buying an imported car increases consumer spending (C) by 400,000 birr and reduces net exports (NX) by 400,000 birr. Because the good was produced abroad, total GDP (Y = C + I + G + NX) is not affected.

Question 10

Suppose a manufacturing firm in Mojo produces 50,000 birr worth of shoes in 2023 but does not sell them, placing them into warehouse storage. How is this output treated in 2023 GDP accounting?

  1. A.It is counted as inventory investment spending by the firm.
  2. B.It is recorded under household consumption expenditure.
  3. C.It is excluded from 2023 GDP until the shoes are finally sold.
  4. D.It is recorded as a government purchase of goods.
Show the answer and why

Answer: A It is counted as inventory investment spending by the firm.

Why

When goods are added to inventory, national income accountants treat the firm as purchasing the goods for itself, counting them as part of investment (I) in that period.

The app holds 12 questions on this unit, marked as you go. These are the first 10.

The textbook pages for unit 7

Unit 7 runs from page 134 to page 160 of the Ministry of Education edition.

Ministry of Education edition, English, 193 pages

Download the PDF

All Grade 10 Economics short notes

Practise this unit in the app

Temari turns this chapter into timed practice and marks it as you go, with an AI tutor to explain anything that did not land.

Start free

Temari.et is also an Android app, free on Google Play.

Get it on Google PlayAbout the Temari app
Sign inCreate your account