Full- employment equilibrium occurs when
A)all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 110.
B)real GDP equals potential GDP.
C)aggregate demand equals short- run aggregate supply.
D)real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 110.
E)all who are willing and able to work, are working.

Question

Quizplus · Accepted Answer

Full-employment equilibrium occurs when real GDP equals potential GDP, meaning that the economy is producing at its maximum sustainable level given its resources and technology. This also implies that all who are willing and able to work are employed because there are no resources or labor available for additional production. The wage level or price level is not specified in the definition of full-employment equilibrium.

Full- Employment Equilibrium Occurs When