Question

Equilibrium output determines the level of employment:

Options

• Irrespective of other factors of production

• Only when the economy is at full employment output

• Given other factors of production

• Only when demand exceeds the output produced at full employment level

Answer 1

The level of equilibrium output decides the level of employment, given other factors of production. If equilibrium output is below the full employment level, not all factors of production will be employed; if it is above, demand exceeds full employment output.