Full-employment level of real output

Definition

The full-employment level of real output refers to the point at which an economy is producing its maximum potential output, with all available resources being utilized efficiently.

Analogy

Imagine a factory operating at full capacity, with every machine and worker working at their highest productivity levels. This represents the full-employment level of real output, where the economy is running at its peak performance.

Related terms

Potential GDP: The total amount of goods and services an economy can produce when operating at full employment.

Natural rate of unemployment: The level of unemployment that exists when the economy is producing at its full-employment level of real output.

Productivity: The measure of how efficiently inputs (such as labor and capital) are used in production to generate outputs.