What Is Full-Employment GDP?


Quick Answer

Full-employment gross domestic product refers to the output of an economy operating at its highest potential and with employment at an ideal level. It represents output in a situation in which an economy is not moving toward a recession or expanding too quickly.

Continue Reading
What Is Full-Employment GDP?
Credit: WIN-Initiative WIN-Initiative Getty Images

Full Answer

Economic output in such a scenario, as measured by GDP, is high enough to keep prices stable and low enough to ward off inflation. In economics, a state of balance is known as equilibrium. If one factor changes, other factors react. To achieve full-employment GDP, inflation and unemployment must be in a state of equilibrium. Economies tend to be cyclical, with unemployment periodically increasing, businesses adjusting their expectations and the economy moving again toward full employment.

Learn more about Economics
Related Videos

Related Questions