Determination of Income and Employment — Part 2: Full Employment, Excess and Deficient Demand: visual lesson, CBSE Class 12 Economics

Lesson

Full employment and demand gaps

Part 2 — full employment, involuntary unemployment, excess and deficient demand, and how policy corrects them.

In this lesson you will

Explain full employment, and distinguish voluntary and involuntary unemployment
Explain excess demand and deficient demand with diagrams, and measure inflationary and deflationary gaps
Suggest fiscal and monetary measures to correct excess and deficient demand

Part 2 at a glance

Concept

Full employment: everyone able and willing to work at the prevailing wage gets work.

Two-column table: full employment means everyone willing to work at the going wage has work, no involuntary unemployment and maximum output; it does not mean every person has a job or that unemployment is zero
Full employment means	It does not mean
Everyone able and willing to work at the going wage has work	Every person in the country has a job
No involuntary unemployment	Zero unemployment: people between jobs or choosing not to work still exist
Output is at its maximum with existing resources	Output can be raised further just by raising demand

Compare

Voluntary unemployment

Involuntary unemployment