## Underemployment Equilibrium

## Definition

In Keynesian economics, underemployment equilibrium is a situation with a persistent shortfall relative to full employment and potential output so that unemployment is higher than at the NAIRU or the "natural" rate of unemployment.

### Underemployment Equilibrium

### What is 'Underemployment Equilibrium'

A condition where underemployment in an economy is persistently above the norm and has entered an equilibrium state. This, in turn, is a result of the unemployment rate being consistently above the natural rate of unemployment or non-accelerating inflation rate of unemployment (NAIRU due to sustained economic weakness.

### Explaining 'Underemployment Equilibrium'

Underemployment in an economy implies that workers have to settle for jobs that require less skill than they possess, or that offer lower wages or fewer hours than they would like. The degree of underemployment is dictated by the strength (or lack thereof) of the job market, and tends to rise when the economy and employment are weak. Advocates of Keynesian economics suggest that a solution to an underemployment equilibrium state is through deficit spending and monetary policy to stimulate the economy.

### Underemployment Equilibrium FAQ

#### What is underemployment equilibrium Class 12?

#### What is the cause of underemployment?

#### What gaps exist when equilibrium does not occur at full employment?

#### Can an economy be in equilibrium when there is unemployment?

#### What do you mean by full employment equilibrium?

#### What is the difference between equilibrium unemployment and disequilibrium unemployment?

### Further Reading

**On the existence of a Keynesian equilibrium**

www.jstor.org [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**A 'static model of a dynamic process': underemployment equilibrium with flexible wages and prices**

www.elgaronline.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**US fiscal policy, Keynes, and Keynesian economics**

www.tandfonline.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Keynes and equilibrium: a note**

link.springer.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Possible policy implications of modern underemployment equilibrium theory**

link.springer.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Is probability theory relevant for uncertainty? A post Keynesian perspective**

www.aeaweb.org [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Some Negative Thoughts on Friedman's Positive Economics**

www.tandfonline.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Financial distress and underemployment**

academic.oup.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Macroeconomic theory and stabilization policy**

ora.ox.ac.uk [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …

**Economic development: then and now**

onlinelibrary.wiley.com [PDF]

… Since Keynesian economics is concerned with certain questions arising in a monetary economy, the uncertainty of a positive … and proved formally in Lemma 2 and is an essential piece of the proof of an under- employment equilibrium … 330 REVIEW OF ECONOMIC STUDIES …