What is full employment equilibrium?
Understand the Problem
The question is asking about the concept of full employment equilibrium, which refers to the state in an economy where all available labor resources are being used efficiently. This implies achieving a balance where the unemployment rate is at its natural level, including both frictional and structural unemployment, without cyclical unemployment.
Answer
Full employment equilibrium is when aggregate demand equals aggregate supply with full employment.
Full employment equilibrium occurs when aggregate demand equals aggregate supply, and all willing and capable individuals have jobs at existing wage rates.
Answer for screen readers
Full employment equilibrium occurs when aggregate demand equals aggregate supply, and all willing and capable individuals have jobs at existing wage rates.
More Information
Full employment equilibrium is a theoretical concept indicating that an economy achieves perfect resource utilization without any inflationary pressures.
Tips
A common mistake is to confuse full employment equilibrium with zero unemployment. It only refers to the absence of cyclical unemployment.
Sources
- What is meant by full employment equilibrium? - toppr.com
