An economy is said to be fully employed when there is absence of involuntary unemployment. Thus, all members of the economy’s labour force who are able and willing to work at the prevailing real wage rates are able to find employment. This means the absence of ‘structural unemployment’, which is unemployment due to a mismatch of the skills possessed by job seekers and the skills required by the available pieces of work. This way skilled workers are pushed into semi-skilled or even unskilled occupation and hence an underemployment of the skilled workers. The consensus among policymakers today is that the full employment rate of unemployment is roughly between 4.5% and 5.0% ( Knotek, 78). It is referred to as the lowest sustainable rate of unemployment. Also known as the ”non-accelerating-inflation rate of unemployment”(NAIRU) .Once unemployment rates reach that level, economic growth needs to be slowed, in order to level out the changes in the unemployment rate. As its name suggests, the NAIRU is supposed to be an unemployment rate (or range of unemployment rates) that produces a stable rate of inflation: if the unemployment rate is lower than the NAIRU then the inflation rate will tend to rise, and vice versa. For instance, in 2008 when the unemployment rate dropped down to 4 per cent in early 2008, the private-sector wage index rose by 4.3 per cent in 2009. The amount of money in circulation suddenly rose and hence the acute inflation.

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