Question

In case of an underemployment equilibrium, what will government do?

(a) Aggregate demand is equal to Aggregate supply.
(b) There exist excess production capacity in the economy.
(c) Resources are not fully and efficiently utilised.
(d) Resources are fully and efficiently utilised.​

Answer 1

Answer:

underemployment is a can a find a job

Answer 2

Underemployment in Macroeconomics refers to the situation where Aggregate Demand(AD) is equal to Aggregate Supply(AS) in the economy but the productive resources are not fully utilized according to their best capacity.Hence,the correct answer is option c) or resources are not fully and efficiently utilized.

Explanation:

In Macroeconomics,underemployment equilibrium implies that AD is equal to AS but the economy is not operating at the full employment and hence,some productive resources in the economy are not completely utilized or used according to their full potential.Under the Keynesian model,underemployment occurs when the AD is not sufficient to accommodate all the productive resources in the economy resulting in ineffectual employment level.When the AD is insufficient,the labor demand by the firms or businesses will be stagnant or might even decrease if the AD declines significantly.This phenomenon will result in goods market equilibrium at the point which signifies equality between AD and AS but the economy will operate at underemployment level,where the productive resources are underutilized.