What does full employment signify for economic policy?

Full employment signifies efficient resource use and minimal unemployment, which is crucial for economic policy. When an economy is at full employment, it means that all individuals who are willing and able to work are employed, resulting in a high level of productive efficiency. This condition reflects a favorable balance in the labor market, where job vacancies align with the number of people seeking work.

In this context, full employment is not merely a target but a key indicator that helps policymakers determine the health of the economy. It allows for maximum output without excess pressure on resources, which can lead to inflation. Thus, the central aim of many economic policies is to maintain full employment as it contributes to sustainable economic growth and stability.

The other options misinterpret the implications of full employment. Full employment does not signify overutilization of resources, nor does it inherently lead to economic stagnation or a guaranteed increase in inflation. Instead, it provides a benchmark for policies aimed at promoting growth while managing inflation, making it a cornerstone of effective economic management.