When is the labour market at 'full employment'?

Question

Quizplus · Accepted Answer

Full employment refers to a situation where there is no cyclical unemployment in the economy. Cyclical unemployment is caused by a lack of aggregate demand in the economy, which leads to firms laying off workers. Therefore, if there is no cyclical unemployment, it suggests that the economy is operating at its potential output level, and all workers who want a job can find one. This does not mean that there is no unemployment in the economy, as there may still be some level of frictional or structural unemployment. Therefore, the correct answer is D - when there is no cyclical unemployment in the economy.

When Is the Labour Market at 'Full Employment