Economic output can be measured by a variety of methods.
You may have heard of the Core Consumer Price Index, Produce Price Index, and Existing Home Sales.
However the economic finance tern of “above full employment equilibrium” may be new to you.
What is “above full employment equilibrium”?
Above Full employment equilibrium sound like a very complex term, so what exactly is it?
Actually the explanation is simpler than you think.
When we talk about of above full employment equilibrium we are actually talking about a given economy is producing goods at a higher level then is usually measured by its GDP.
An economy that is in above full employment equilibrium will indicate that in the short run, demand will not exceed supply.
However an economy that is in full equilibrium is deemed to be excessively active and at some point in the future will create more demand for goods and services which will have the effect of pushing prices upwards and causing inflation.
This could lead to the threat of greater level of inflation in the future.
