Question

Briefly discuss the concept of over full employment equilibrium. Use diagram.

Answer 1

Over full employment equilibrium refers to a situation, when Aggregate demand is equal to Aggregate supply beyond the full employment level of output in the economy which is expected in the long term potential output.

In Figure , AD, = AS at point ‘G’ which is higher than the full employment level.

As OQ, is more than OQ, point ‘G’ signifies the over full employment equilibrium.