Full-employment of output

Definition

Full-employment of output refers to the situation when an economy is producing at its potential GDP, utilizing all available resources efficiently without any cyclical unemployment.

Analogy

Think of a restaurant kitchen operating at full capacity with all chefs actively cooking. Full-employment of output is like having every chef busy preparing meals, ensuring that no one is idle or unemployed.

Related terms

Potential GDP: The maximum level of real GDP that can be produced by an economy when all resources are fully utilized.

Cyclical Unemployment: Unemployment caused by fluctuations in economic activity, such as during recessions or downturns.

Natural Rate of Unemployment: The rate of unemployment that exists when the labor market is in equilibrium and there is no cyclical unemployment.