When the economy is at full-employment:

Question

Quizplus · Accepted Answer

Full-employment refers to the level of employment where all those who are willing and able to work at the going wage rate have jobs. At this level, the unemployment rate is at its natural rate, which is the rate of unemployment that is consistent with the economy operating at full production capacity (also known as the non-accelerating inflation rate of unemployment or NAIRU). While some frictional and structural unemployment may still exist at full employment, there is no involuntary unemployment. However, inflation may still occur, but it should be in line with what was expected by the central bank.

When the Economy Is at Full-Employment