The Ethiopian government aims to increase overall expenditure by more than 100% fromrn690.9 billion in GTP periods (20 10111-2014115) as compared to previous plan periodrn(PASDEP, 2004105-2009110) expenditure. According to some scholars- Keynesian view,rnthe increase in Public spending on socio-economic and physical structures is importantrnand encourages economic growth. However some scholars - Classical economists on thernother hand argue that the increase in public expenditure may shifi resources Fom thernproductive private sector to public sector which they believe unproductive and hence,rncrowd out overall performance of the economy. These views indicate that policymakersrnare under debate whether increase in public spending helps or hinders economic growth.rnThe paper investigates the relationship between government expenditure and domesticrnoutput (GDP) in Ethiopia. The study attempts to measure the impacts of sectoral publicrnspending - human capital and agriculture, on economic growth; using annual data set onrnGDP and government expenditure for the period 1960161 -201011 I. Elasticityâ€™s of GDPrnwith respect to human capital and agriculture are estimated using OLS regressionrnanalysis. The study employ co-integration and error-correction model to examine thernshort and long run relationships between GDP and government sectoral spendingrn(human capital and agriculture).rn/t is found that education sector expenditure has both short-run and long-run statisticallyrnpositive-significant effect on growth while health sector spending have negative-insignificantrnrelation. With regard to agriculture, the result shows that it has negativernrelationship with growth. The result also found the existence of longrun relationshiprnbetween the components of government spending and economic growth. These resultsrnhave policy implication that education if properly funded could bring about sustainablerneconomic growth.