Question

Explain the meaning of underemployment equilibrium.

Answer 1

Underemployment equilibrium refers to a situation when equilibrium is attained i.e., aggregate demand is equal to aggregate supply below full employment level or when resources are not fully employed. An economy can be in equilibrium when there is unemployment in the economy when the aggregate demand= aggregate supply in the economy. It refers to a situation when aggregate demand is equal to the aggregate supply at a level where the resources are not fully employed.