Question

Can there be unemployment at full employment level of income? Explain.

Answer 1

Full employment refers to a situation when all the resources are fully employed at their normal capacity. This statement doesn't mean that there cannot be any unemployment in an economy. At full employment level, there cannot be any involuntary unemployment. But there can be :

(a) Voluntary unemployment which means that resources are unemployed as per their own will.

(b) Frictional unemployment—When there is unemployment due to switching of jobs by an individual. This unemployment is temporary.