Suppose the economy is at full employment, and energy prices spike. in the short run, output will increase in the long run, output will remain unchanged.
When there is full employment, neither cyclical nor deficient-demand unemployment exists. Due to the possibility of structural and frictional unemployment still existing, full employment does not mean that all unemployment has been eliminated.
An economic scenario known as full employment occurs when all of the labor resources are being utilized as effectively as feasible. The term "full employment" refers to the maximum possible level of both skilled and unskilled workers in a given economy.
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