Full Employment

   Definition: The definition of full employment would be the situation where everyone willing to work at the going wage rate is able to get a job. Full employment occurs when everyone in the economy who is willing to work at the current market rate for someone of his skills have jobs. Full employment does not imply that all adults have jobs State of economy in which all eligible people who want  to  work can find employment at prevailing wage rates. However, it does not imply 100% employment because allowances  must be made for frictional unemployment  and seasonal factors.

    Optimal Unemployment Level
Another definition of full employment would be the ‘optimal’ level of unemployment. In practise, an economy will never have zero unemployment because there is inevitably some frictional unemployment. This is the unemployment where people take time to find the best job for them. Frictional unemployment is not necessarily a bad thing. It is better people take time to find a job suitable for their skill level, rather than get the first job that comes along.                                                                                                          
                                                                                                                                                                                 Full Employment and Full Capacity.
Another way to think of full employment is when the economy is operating at an Output level considered to be at full capacity. i.e. it is not possible to increase real output because all resources are full utilised. This would be a point on a Production possibility frontier. It can also be shown by AD/AS diagram.

Diagram of Full Employment

In this diagram full employment would be at an output of Y2. Here any increase in AD only causes inflation. In practise it is difficult to know precisely what counts as full employment. Practical reasons make it difficult for every firm to operate at 100% capacity. Optimal capacity may considered to be 85%

When an economy achieves full employment,?

(a) the unemployment rate will be zero.
(b) frictional unemployment will be zero.
(c) the unemployment rate will equal the natural rate of unemployment.
(d) structural unemployment will be zero.

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