Question

Distinguish between full employment equilibrium and underemployment equilibrium.

Answer 1

Basis	Full Employment Equilibrium	Underemployment Equilibrium
Meaning	It refers to a situation when $AD=AS$ and all those who are willing and able to work at the existing wage rate, get work without any undue difficulty.	It refers to a situation when AD=AS, but all those who are willing and able to work at the existing wage rate, do not get work.
Impact on Real Output	At this equilibrium level, real output reaches its maximum point.	At this equilibrium level, real output does not reach its maximum.
Inflationary Gap	Any excess of AD over AS corresponding to full employment equilibrium leads to inflationary gap	Any excess of AD over AS beyond underemployment equilibrium does not lead to inflationary gap.