What is full of GDP employment?

Gross domestic product (GDP) measures the overall value of all goods and services produced in the country in a given period, usually one year. GDP represents valuable data for economists because it serves as an indicator in the real world of the country's economic health. Economists can also consider full employment of GDP for a more theoretical measure of economics. Full employment of GDP represents a potential GDP value when each source, including all work and materials, is used at their maximum efficiency level. GDP full employment can also be known as the potential or capacity of GDP. The difference between the two values ​​is known as the GDP gap. Economists believe that in the free market economy, GDP gap can only exist in a short term. In the long run, consumers and businesses will modify their shopping and production habits to realize full HDP employment.

But there are several problems with this theory. The first is that economists do not agree with the definition of full employment. Some saythat this state occurs when unemployment rate is at zero, while others believe it can be up to 10 or 15 percent and is still characterized as a full job.

This discrepancy occurs because there are two types of unemployment. Froper unemployment is temporary and occurs because people are between work and are actively looking for a new one. While these people are included in the short -term determination of full employment of GDP, structural unemployment is ignored. Structural unemployment concerns the percentage of people who will not work regardless of the state of the economy, whether that they decide or are physically incapable. Since some of these people could contribute to the economy and improve economic efficiency, some theorists argue full employment employment can never occur unless all people are employed in jobs suitable for their levelseň skill.

In the 1960s, economist Arthur Okun developed theory that is used to relation to the unemployment rate and gap in GDP. Okun's law states that each of the 1 percent increase in the unemployment rate leads to a two percent increase in GDP gap. While other scientists have submitted variations of this topic, Okun's law continues to serve as a widely used benchmark or rule or thumb for those who study the relationship between employment and changes in GDP.