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A-Level Economics · Keynesian LRAS (spare capacity) diagram question

Which point shows FULL-EMPLOYMENT output, where the Keynesian LRAS becomes vertical?

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The answer

Point H. Point H at Yfe: every factor of production is in use, so the curve goes vertical — no extra output is physically available. Full employment is where the curve turns VERTICAL — point H, at Yfe. We are using all the available labour and capital, so we cannot produce any more; to produce beyond it we would have to invent people. Above H, any further AD increase is pure price level. This is the one point where Keynesians and Classicals agree.

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