Below full employment equilibrium,
Definition of Below full employment equilibrium:
When an economy is currently below its long-run, full-employment real GDP level, there will be economic unemployment of resources, which will lead to an economic recession. The economy is producing below, or inside, its production possibilities frontier (PPF). The long-run real GDP level represents what an economy can produce had it been under full employment. When an economy is not in full employment, it cannot produce what it would have been in full employment. That output gap is caused in part by the employment shortfall.
A term used in economic analysis whereby the output of short-term Gross Domestic Product (GDP) is lower than anticipated long-term GDP. When this occurs, it means that input resources (capital, labor, real estate, etc.) are not producing at the level that could be achieved at full employment levels. This may represent an indication of a recessionary period.
Below full employment equilibrium is a macroeconomic term used to describe a situation where an economy's short-run real gross domestic product (GDP) is lower than that same economy's long-run potential real GDP. Under this scenario, there is a recessionary gap between the two levels of GDP (measured by the difference between potential GDP and current GDP) that would have been produced had the economy been in long-run equilibrium. An economy in long-run equilibrium is experiencing full employment.
How to use Below full employment equilibrium in a sentence?
- When the economy is operating below full employment, some labor, capital, or other resources are unemployed (beyond the natural rate of unemployment). .
- The economy is below full-employment equilibrium when its short-run GDP is lower than the potential GDP. .
- Normally, market forces would be expected to push the economy back toward long-run equilibrium at full employment.
- A key aspect of Keynesian economics is the idea that an economy can get stuck in a below full employment equilibrium. .
- Numerous factors might cause an economy to temporarily be below full employment equilibrium.
Meaning of Below full employment equilibrium & Below full employment equilibrium Definition