Question
Explain the meaning of under-employment equilibrium. Explain two measures by which full-employment equilibrium can be reached.

Answer

When aggregate demand and aggregate supply are equal at less than full employment level then it is a situation of underemployment equilibrium. Measures to reach full employment equilibrium:
  1. Increase in government expenditure
  2. Reducing Bank Rate
  3. Buying of govt. securities from the market by the Central Bank etc.
All these measures will result in an increase in aggregate demand leading the economy to full employment level.

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