Final answer:
At full employment, the true statement is that unemployment is low. Full employment corresponds to the lowest level of unemployment that can be sustained without causing high inflation, and is consistent with a stable inflation rate.
Step-by-step explanation:
When the economy is at full employment, it generally means that unemployment is at its lowest sustainable level without causing inflation to rise uncontrollably. Following the Keynesian Phillips Curve, there is typically a tradeoff between the unemployment rate and the inflation rate. This curve suggests that when unemployment is low, inflation tends to be higher, and vice versa. However, when the economy is at full employment, it does not necessarily mean that inflation is high; in fact, the natural rate of unemployment, which is the rate the economy naturally gravitates towards, is consistent with a stable rate of inflation. Therefore, based on the information provided, when the economy is at full employment, the true statement is that unemployment is low.
A common misconception is that full employment leads to continually increasing inflation, but this is not always the case. It's also incorrect to state that GDP is decreasing or that interest rates are low simply because the economy is at full employment. These factors can vary based on other economic conditions and policy decisions.
To sum up, full employment suggests an economy operating efficiently with minimal unemployment, but it does not dictate specific levels of inflation or interest rates.