Final answer:
The depletion of energy supplies would initially reduce full employment output in an economy by curtailing production capacity. In the short term, this would decrease the total output, but the long-term adjustments may allow a return to potential GDP levels, although with potential alterations in wages and employment.
Step-by-step explanation:
The question 'How would having energy supplies depleted impact full employment output?' connects with the concept of the economy's ability to produce goods and services at full potential. In economics, potential GDP is viewed as the maximum output an economy can produce without causing inflation. When an economy is at full employment, all available resources, including labor and capital, are being utilized efficiently. If energy supplies are depleted, it could lead to a substantial impact on full employment output since energy is a crucial input for production processes across various sectors.
According to Keynesian economics, as discussed by Keynes in 'The General Theory of Employment, Interest, and Money', a lack of demand can lead to a reduced incentive for firms to produce, even if the technical capability to produce remains unchanged. Similarly, a shortage in energy supplies could cause production to fall below its full potential, not due to a lack of demand but because of the reduced capability to maintain or increase production. This would potentially shift the short-run Keynesian aggregate supply curve to the left, indicating a decrease in the total output at every price level.
In the long run, however, the neoclassical perspective suggests that the economy will adjust. Factors like unemployment leading to lower wages could shift the aggregate supply curve back to the right, allowing output to return to potential GDP levels. Nonetheless, the initial depletion of energy supplies would impact full employment output by reducing production capability, thereby impacting overall economic performance.