Please give an example to explain why full  employment is not equal to zero unemployment.

Please explain with the help of an example.

Asked by anujbajpai44 | 13th May, 2020, 07:33: PM

Expert Answer:

Full employment is defined as a situation where there is no involuntary unemployment and all resources are fully and efficiently employed at the existing wage rate.

However, in reality, full employment does not mean zero unemployment.

This is because, for example, there is a possibility of voluntary unemployment, where people are unwilling to carry out any productive work. Also people might want to change employment from one job to another (called frictional unemployment). Or when new machines are introduced as a result workers unable to find work in teh new industries with different skill requirements this keeps them unemployed (called structural unemployment). 

Thus full employment does not mean zero unemployment due to the existence of voluntary, structural and frictional unemployment.

Answered by Christina | 14th May, 2020, 09:56: AM

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