1.

Macro economy
Objective and Activities
The Macroeconomic Division undertakes research related to economic growth and development, inflation and
unemployment, savings and investment, government spending, macroeconomic dynamics, financial and
monetary research, government regulations and policy instruments, and other related topics.  
The main macroeconomic policy objective of the five year Growth and Transformation Plan (GTP) was
achieving a rapid, sustainable and broad-based economic growth through creating conducive macroeconomic
environment. It is observed that during the first four years of GTP implementation i.e., (2010-11 to 2013-14),
real GDP growth rate averaged at 10.1 per cent, slightly lower than the target set for the period i.e., 11 per cent.
Yes
Because, Ethiopia’s poverty rate of 44 percent and many Ethiopians live in hazardous conditions. Some of the
country’s homes are made from cardboard. Others are made from rope, sticks, mud and other materials
that cause poor hygiene for residents. Many homes even lack windows and sometimes trap hazardous fumes
inside.
Droughts and other disasters cause Ethiopia’s farms to lack necessary amounts of rainwater for irrigation.
Famines occur in effect and leave crops to suffer greatly. Ethiopia’s food and fertilizer prices increase as well,
leaving many residents without the financial means to afford these items. This is especially problematic when
considering that 80 percent of Ethiopians rely on agriculture to stabilize their economy.
A lack of infrastructure and basic services, such as safe drinking water, education and healthcare, contribute to
Ethiopia’s poverty as well. Malaria, HIV and other diseases often kill Ethiopia’s young residents who provide
for their families. If more Ethiopians had access to healthcare and other vital services, more Ethiopian families
might be able to rise above poverty.
Many Ethiopian families that are run by women are especially vulnerable to poverty. Since many Ethiopian
women do not participate in awareness programs, many of their infants suffer malnutrition, lack literacy skills
and sometimes die. This problem could be avoided if more Ethiopian women, and other less-privileged groups
in the country, participated in the awareness programs.
Human rights abuses, even though some have been carried out with the intent to strengthen Ethiopia’s economy,
have done great harm to the country’s poor. There is hope for positive changes to Ethiopia’s economy. For more
than a decade, Ethiopia has witnessed an economic growth rate of 10 percent, bringing the country close to
meeting the U.N.’s development goals. Ethiopia’s government plans for the country to have a middle-income
rate by 2025.
Ethiopia’s poverty rate in 2000 was 44 percent but dropped to 30 percent by 2011. Agricultural growth was one
of the main reasons for this change. It could help Ethiopians in the present if such a change were to occur again.
Education, household health and living standards have also been making steady improvements since 2000.
Ethiopia should maintain a focus on agricultural development in order to strengthen its economy. Promoting the
growth of farms and helping households overcome migration constraints could help Ethiopians achieve
financial security as well. While safety net programs have also proven to be effective, those programs must still
adapt to Ethiopia’s changing poverty conditions.
5.
Causes of inflation
Inflation is a long-term, persistent increase in the price level. From the quantity theory identity that money stock
times velocity is equal to the price level multiplied by real output, one can specify the rate of inflation as
monetary growth + rate of change in velocity – output growth. In an open economy, both domestic and foreign
structural changes and policy alterations can affect inflation. For demonstration purposes, this article considers
three types of policy instruments—fiscal, monetary (domestic credit), and external (nominal exchange rate)—in
addition to structural output (domestic net of foreign) disturbances. To study how these disturbances affect the
rate of inflation, we construct a modified model of an inflation trap. Following the view that inflation in the
long run is a monetary phenomenon, we focus primarily on the money market and its dynamic adjustment
process.
Inflation is an economic term describing the sustained increase in prices of goods and services within a period.
To some, inflation signifies a struggling economy, whereas others see it as a sign of a prospering economy.
Here, we examine some of the residual effects of inflation.
 Inflation, the steady rise of prices for goods and services over a period, has many effects, good and bad. ...
Because inflation erodes the value of cash, it encourages consumers to spend and stock up on items that are
slower to lose value. It lowers the cost of borrowing and reduces unemployment. Because inflation erodes the
value of cash, it encourages consumers to spend and stock up on items that are slower to lose value. It lowers
the cost of borrowing and reduces unemployment.
Solution
There are however some practical problems to avoiding inflation, especially concerning the medium of
exchange function of money. When, for instance, a loan has been contracted in ounces of gold, the debtor has
the right to pay the loan back in fiat dollars. This leads to a significant increase in legal uncertainty. Moreover,
experiments to introduce alternative media of exchange encounter another difficulty due to the important
network effects of money. As the government demands the legal tender money through its direct taxation and
spends it later, it creates an important demand and use for the legal tender money. Due to the sheer size of the
government in the economy and the engrained network effects of media of exchange, it is difficult to introduce
a competing medium of exchange in order to avoid inflation.
Causes of Unemployment
Unemployment is caused by various reasons that come from both the demand side, or employer, and the supply
side, or the worker.
Demand-side reductions may be caused by high interest rates, global recession, and financial crisis. From the
supply side, frictional unemployment and structural employment play a great role.
Inadequate education and lack of productivity is costing jobs. Unemployment increases progressively with
decreased educational levels; and the education system is not producing the skills for the labour market. Labour
supply is affected by the increase in the number of job seekers over the years.
 Consequences of unemployment
The impact of unemployment can be felt by both the workers and the national economy and can cause a ripple
effect.
Unemployment causes workers to suffer financial hardship that impacts families, relationships, and
communities. When it happens, consumer spending, which is one of an economy’s key drivers of growth, goes
down, leading to a recession or even a depression when left unaddressed.
Unemployment results in reduced demand, consumption, and buying power, which in turn causes lower profits
for businesses and leads to budget cuts and workforce reductions. It creates a cycle that goes on and on that is
difficult to reverse without some type of intervention.
 Unemployment has costs to a society that are more than just financial.
 Unemployed individuals not only lose income but also face challenges to their physical and mental
health.
 Societal costs of high unemployment include higher crime and a reduced rate of volunteerism.
Solution for unemployment
Suggestions to Solve Unemployment Problem
1. Following are the suggestions to solve unemployment problem:
2. (i) Change in industrial technique:
3. (ii) Policy regarding seasonal unemployment:
4. (iii) Change in education system:
5. (iv) Expansion of Employment exchanges:
6. (v) More assistance to self employed people:
7. Reducing Occupational Immobility. Labour resources are usually occupationally immobile because it takes
time for people to gain the sufficient skills that are necessary for working in a certain industry. ...
8. Employment Subsidies. ...
9. Sustained Economic Growth.
A number of other solutions to the unemployment problem have been advanced in the literature. For
example, work sharing, early retirement, and reduced migration have been discussed. These policies affect the
labor market by reducing the supply of labor.