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Finance: What is Above Full Employment Equilibrium? 20 Views


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Description:

What is Above Full Employment Equilibrium? Above Full Employment Equilibrium happens when an economy is basically doing more than it realistically can. It’s producing at a rate that’s higher than expected in the long-term or higher than previous averages. It also means that all labor available in the economy is being used, so everyone that can work...is working. This doesn’t last long though; the high demand that causes it drives up prices that eventually come back to equilibrium when they are no longer affordable.

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Transcript

00:00

Finance a la shmoop what is above full employment equilibrium? question wouldn't

00:08

full employment mean that everyone who wants a job is employed wouldn't that be

00:14

full employment well no it's a government statistics so full isn't [Government worker in office]

00:18

really full it's you know full-ish and full is probably impossible anyway

00:24

because there will always be college students part-time uber drivers [Students graduating and uber driver appears]

00:27

derelicts and you know actors so when economists talk about full employment

00:31

they mean that everyone who is actively seeking work is generally finding work

00:37

but it recognizes that a lot of people have either given up the hunt and are

00:41

happy living on the equivalent of replacement value of you know 48 grand a [Woman at the desk of a cafe]

00:45

year of welfare or they're you know off the grid

00:48

well the equilibrium notion is the hard part to conceive here when "almost

00:53

every single living being" is employed it likely means that the

00:58

economy is on fire in the in the good way tons of demand for stuff tons of

01:04

shortages of labor and supplies and it also probably means that we have roaring

01:08

inflation which is generally bad there is a balance of employed and unemployed [employed and unemployed workers on a scale]

01:13

which makes for a stable set of parameters that keep the people employed

01:17

who want to be employed and it keeps inflation at small numbers such that old

01:22

people who generally retire on bonds aren't forced to live inhuman lives in

01:27

their station wagons parked on the side of the road because roaring inflation at

01:32

6% has made their 2 percent a year bond investment returns destroy most of the

01:36

buying power of their life savings belt historically economists have generally

01:41

targeted 95 percent as the full employment equilibrium number or 5

01:45

percent as the unemployment rate they're shooting for in other words at that

01:49

level there is low or just very modest inflation and the employment seeking [Man discussing employment equilibrium]

01:55

masses have generally found what they've been looking for you know like bono

01:59

turns out he was just looking for his car keys.... go figure..[Bono singing into microphone]

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