The equilibrium level of output may be less than the full employment level of output. This situation reflects:-

A. Deficient demand
B. Declining prices in long run
C. Fully employed factors of production
D. Unemployment in the economy
E. Rising prices in short run

Choose the correct answer from the options given below:

A, B and D only

Full employment level of income is that level of income where all the factors of production are fully employed in the production process.

The equilibrium level of output may be more or less than the full employment level of output. If it is less than the full employment of output, it is due to the fact that demand is not enough to employ all factors of production. This situation is called the situation of deficient demand (A). It leads to decline in prices in the long run (B).  This means that there is not enough spending in the economy to purchase all of the goods and services that businesses are producing. As a result, businesses are forced to reduce production, which leads to unemployment. (D).  On the other hand, if the equilibrium level of output is more than the full employment level, it is due to the fact that the demand is more than the level of output produced at full employment level. This situation is called the situation of excess demand. It leads to rise in prices in the long run.