FuIl Employment Is a situation where those who are able and willing to work are getting work at the prevailing wage rate.
When Aggregate Demand is greater than Aggregate Supply at full employment, such a situation is known as Excess Demand or Inflationary Gap. It is called inflationary because this leads to a rise in general price level of the economy.
or
Two alternative ways of determining equilibrium level of income are:
I. Aggregate Demand-Aggregate Supply Approach (AD-AS Approach)
II. Saving-Investment Approach (S-I Approach).
Interrelation between the two approaches:
AD=AS (AD=AS) (AD-AS approach)
C+I=C+S
I=S (S-I) approach)
