The economy is said to be at full employment when only frictional unemployment exists. That is, everyone who wishes to work at the going wage-rate for his type of labour is employed, but because it takes time to switch from one job to another there will at any one moment be a small amount of unemployment. Thus the full employment leve! of Gross Domestic Product can be thought of as measuring full capacity output, i.e. the target output of which the economy is capable when all resources are employed to their feasible limits.
|Reference: The Penguin Dictionary of Economics, 3rd edt.|