Full-employment output refers to the level of real GDP where all available resources in an economy are being used efficiently, resulting in zero cyclical unemployment.
Imagine a pizza restaurant with enough staff to handle all orders without any delays or idle workers. When every employee is working productively, it represents full-employment output.
Output gap: The difference between actual real GDP and potential real GDP. A positive output gap indicates an economy is producing above its full-employment level.
Cyclical unemployment: Unemployment caused by fluctuations in economic activity, such as during recessions or downturns.
Labor force participation rate: The percentage of working-age population that is either employed or actively seeking employment.
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.