What is full employment equilibrium class 12

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Looking for What is full Employment Equilibrium level, its definition, concepts and diagram as per the syllabus of class 12 CBSE Board and other States Board.

See, this topic is concerned with Determination of Income and Employment Chapter of Macroeconomics class 12

Let’s discuss it in detail.

What do you mean by Full Employment Equilirbium Level (class 12)

See, Equilibrium here means, the Determination of Income Equilibrium in the short run.

As per the Keynesian Economy theory. Equilibrium of Income can be at full employment, underemployment, and at an overfull employment level.

Note:- Income Equilibrium is attained when the aggregate demand is equal to aggregate supply.

When we talk about Equilibrium of Income and full employment level. Here we mean all human labour who is capable and willing to work, is employed.

In other words, it is a situation of absence of involuntary unemployment.

Definition of Income Equilibrium at full employment level

It refers to a situation when the aggregate demand is equal to the aggregate supply at full employment level.

Sandeep Garg

Full employment Equilibrium refers to that situation in the economy when AS = AD (or S = I) but without fuller utilization of resources. So that there is no excess capacity or unemployment in the economy.

T.R Jain

Diagram & Explanation of Income Equilibrium at full employment level


  • In the above diagram. Equilibrium of Income at full employment occurs at point E. At this point Aggregate Demand, EQ is equal to Aggregate Supply OQ.
  • Here, the volume of aggregate demand is sufficient for a producer to employ all those who are willing to work and the prevailing wage rate.
  • It is the situation of absence of involuntary unemployment.
  • In other words, we can say, It is the situation of equilibrium at the full employment level.
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