As an economy approaches full employment,real output declines.

Question

Quizplus · Accepted Answer

As an economy approaches full employment, there may be a reduction in the rate of economic growth, but real output does not necessarily decline. Full employment is the level of employment where all available labor resources are being used in the most efficient way, and any further increase in employment would result in higher inflation or wages. At this point, the economy is said to be operating at its potential output or full capacity, which means that it is producing its maximum sustainable level of goods and services given its available resources and technology. However, there may still be room for productivity improvements, technological advancements, or investments that could increase real output over time. Thus, the statement that "as an economy approaches full employment, real output declines" is false.

As an Economy Approaches Full Employment,real Output Declines