Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Above Full-Employment Equilibrium

What it is:

Above full-employment equilibrium occurs when a country's gross domestic product (GDP) is higher than normal.

How it works (Example):

For example, let's say Country X's normal rate of GDP growth is 2% per year. Over the last two years, however, GDP has grown by 5% a year. The country is experiencing above full-employment equilibrium. The term's reference to employment reflects the fact that the country is producing goods at a higher rate that it normally does when everybody has a job (full employment).

Why it Matters:

Above full-employment equilibrium sounds like a good thing, and it generally is a sign that a country is doing well. However, above full-employment equilibrium can also lead to inflation. That's because the country is running at full capacity and can't produce more goods and services than it already is producing, which can lead to supply shortages, which in turn drive up prices. Accordingly, the condition puts many economists on alert.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...