When we are at full employment

Question

Quizplus · Accepted Answer

Full employment means that the economy is producing at its maximum potential output level, and all factors of production are being utilized. This means that there is still some level of frictional and structural unemployment, which are caused by factors such as workers transitioning between jobs or changes in the structure of the economy. However, cyclical unemployment, which is caused by a decrease in aggregate demand or a recession, is minimized at full employment. Therefore, the cyclical unemployment rate is closest to 0 at full employment, while frictional and structural unemployment may still exist to some extent.

When We Are at Full Employment