When the economy is at the full- employment level of national income, this means that

Question

Quizplus · Accepted Answer

At the full-employment level of national income, it means that the economy is producing at its most efficient level without causing inflation. This does not imply that everyone is employed (as there is always some level of frictional or structural unemployment) or that the amount of money in the economy is at its maximum. It indicates that aggregate demand is sufficient to purchase the full employment level of output, hence there is no deficiency of demand. The multiplier effect generating a large number of jobs is more related to fiscal stimulus rather than the state of being at full employment.

When the Economy Is at the Full- Employment Level of National