<p>Because at full employment the aggregate output of society, and by extension also (Marshallian) welfare  is sustainably maximized.</p>
<p>If we produce below full employment that means we are not fully exploiting some scarce resources. If we produce above full employment we are exploiting resources in unsustainable manner (workers working overtime to point of exhaustion, running machines more than optimal etc).</p>
<p>Also in <em>simple</em> Keynesian models optimal rate of inflation is actually zero. Mind you this only holds for very simple models. In a non-linear New Keynesian models with zero-lower-bound there will be usually some non-zero optimal inflation. Although, the optimal rate of inflation will still be close to zero, it could be as low as 0.3% (e.g. see <a href="https://eml.berkeley.edu/%7Eygorodni/CGW_inflation.pdf" rel="nofollow noreferrer">Gorodnichenko et al 2011)</a>.</p>

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2022-09-09T08:50:20.343Z
2022-09-09T08:50:20.343Z
1muflon1
<p>In almost every introductory macro economics class, while studying the simple Keynesian model, students are always taught that everyone in the economy always works to achieve full employment of resources. However, if the unemployment rate falls below <a href="https://en.wikipedia.org/wiki/NAIRU#NAIRU" rel="nofollow noreferrer">NAIRU</a>, inflation  occurs.</p>
<p>If this is the case, why is full employment preferred in the simple Keynesian model?</p>

<macroeconomics><inflation><keynesian-economics>
In the simple Keynesian model, is full employment of resources really desirable?
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# In the simple Keynesian model, is full employment of resources really desirable?

(Asked by: username_0 on 2022-09-09)

In almost every introductory macro economics class, while studying the simple Keynesian model, students are always taught that everyone in the economy always works to achieve full employment of resources. However, if the unemployment rate falls below [NAIRU](https://en.wikipedia.org/wiki/NAIRU#NAIRU), inflation occurs.

If this is the case, why is full employment preferred in the simple Keynesian model?

**Tags:** macroeconomics, inflation, keynesian-economics


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## 1 answers

### Answer by username_1 on 2022-09-09. Score: 1 | Accepted answer

Because at full employment the aggregate output of society, and by extension also (Marshallian) welfare is sustainably maximized.

If we produce below full employment that means we are not fully exploiting some scarce resources. If we produce above full employment we are exploiting resources in unsustainable manner (workers working overtime to point of exhaustion, running machines more than optimal etc).

Also in *simple* Keynesian models optimal rate of inflation is actually zero. Mind you this only holds for very simple models. In a non-linear New Keynesian models with zero-lower-bound there will be usually some non-zero optimal inflation. Although, the optimal rate of inflation will still be close to zero, it could be as low as 0.3% (e.g. see [Gorodnichenko et al 2011)](https://eml.berkeley.edu/%7Eygorodni/CGW_inflation.pdf).


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