Question

The achievements of full employment is a sufficient condition for the achievement of economic growth. Evaluate.

Word Limit: Maximum 250 words.

Answer 1

Answer

Full employment is an economic situation in which all available labor resources are being used in the most efficient way possible. Full employment embodies the highest amount of skilled and unskilled labor that can be employed within an economy at any given time.Full employment is the lowest point of unemployment we can get to before starting to cause inflation.

When the economy is at full employment that increases the competition between companies to find employees. This means skilled workers can demand higher wages with more benefits and businesses are more likely to grant them. This can be very good for individuals but bad for the economy over time. If wages increase on an international scale, the costs of goods and services would increase as well to match the salaries of employees. This can cause inflation and diminish the value of currency if left unchecked.

Full employment involves zero or very low unemployment. In practice, there will always be some frictional unemployment as people are looking for new jobs or leaving school. Economists suggest an unemployment rate of 3% is close to full employment. However, it is difficult to determine precisely. Full employment implies the macroeconomy is operating at its full capacity and there is no output gap or demand deficient ununemplolloyment.

When discussing the health of the economy, one of the important measures that shows the strength of it, is the unemployment rate. The unemployment rate is measured by the number of people available for work who don’t have jobs and have actively looked for one in the past four weeks. The economy needs a low unemployment rate because with a low rate, more people have jobs and are willing to spend money. This will improve the economy by stimulating businesses. However, there can be a point of diminishing returns where too much unemployment can be damaging. That’s why we want to stay around the point of full employment.