Differentiate between full employment and underemployment equilibrium.
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S.
No.
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Full Employment Equilibrium
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Basis
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Underemployment Equilibrium
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1.
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Full employment equilibrium refers to the situation where aggregate demand is equal to aggregate supply, and all those who are able to work and willing to work (at the existing wage rate) are getting work.
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Meaning
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Underemployment equilibrium refers to the situation where AD is equal to AS, but all those who are able to work and willing to work (at the existing wage rate) are not getting work.
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2.
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Full employment equilibrium is a stable equilibrium and real output| reaches at its maximum point.
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Stable/ Untable
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Underemployment equilibrium is not a stable equilibrium (unstable equilibrium) and real output does not reach to its maximum.
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3.
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Departure from full employment equilibrium may cause inflationary Igap or deflationary gap.
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Departure
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Departure from underemployment equilibrium does not cause inflationary or deflationary gap.
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