Question

What do you understand by full employment ?

Hint:

Full employment doesn't mean 100% of people have jobs. It means everyone who wants a job can find one at the prevailing wage rate, with some natural "in-between jobs" unemployment still existing.

Answer 1

Full employment is an economic situation in which all available labor resources are being used in the most efficient way possible. It does not mean zero unemployment, but rather a low level of unemployment (typically 4-5%) that accounts for frictional and structural unemployment, known as the natural rate of unemployment. It implies the absence of cyclical or demand-deficient unemployment.