Full Employment
1 Quick Explanation 1–3 min
Full employment does NOT mean zero unemployment — there is always some natural/frictional unemployment.
It means all willing and able persons who seek work at the prevailing wage get work.
2 Detailed Notes
Definition
Definition
Full employment refers to a situation where all those who are willing and able to work at the existing wage rate are actually employed. It does not mean zero unemployment — frictional and voluntary unemployment may still exist.
Key points
Types of unemployment that remain
- Frictional: time gap between changing jobs.
- Voluntary: people who don't want to work at the going wage.
- Seasonal (in some sectors).
Comparison
Full employment equilibrium vs underemployment equilibrium
| Basis | Full employment equilibrium | Underemployment equilibrium |
|---|---|---|
| AD | Equal to AD at YF | Below AD at YF |
| Output | Maximum (YF) | Less than maximum |
| Unemployment | Only frictional/voluntary | Involuntary unemployment |
Important
Key idea
Keynes argued the economy can settle in underemployment equilibrium — AD too low. Government must raise AD (spending) to reach full employment.
In One Minute
Full employment = all able & willing get work at the going wage. Frictional & voluntary unemployment still exist. Equilibrium can be below full employment (underemployment).
Important for Exam
- ⭐ 1-mark: full employment definition.
- ⭐ 3-marks: underemployment equilibrium vs full employment.
- ⭐ Role of government spending to reach YF.
- ⭐ Frictional & voluntary unemployment still present.
Watch & Learn
Watch on YouTubeEmployment, Growth, Informalisation and Other Issues - One Shot - Chapter 6 - Class 12
by Rajat Arora
Why watch? Clear difference, board-aligned.
Open on YouTube Watch on YouTubeEmployment, Growth, Informalisation and Other Issues - One Shot - Chapter 6 - Class 12
by Rajat Arora
Why watch? Beginner friendly explanation.
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