Full- employment equilibrium occurs when
A) potential GDP exceeds real GDP.
B) real GDP exceeds potential GDP.
C) real GDP equals potential GDP.
D) a result of an increase in long- run aggregate supply.

Question

Quizplus · Accepted Answer

Full- employment equilibrium occurs when the economy is producing at its potential GDP, meaning that real GDP equals potential GDP. This is the point where there is no cyclical unemployment, and the economy is operating at maximum production capacity.

Full- Employment Equilibrium Occurs When