Final answer:
Cyclical and seasonal unemployment do not exist in full employment.
Step-by-step explanation:
When an economy is operating at full employment, with no output gap, two main types of unemployment cease to exist:
Cyclical Unemployment: This type of unemployment is linked to fluctuations in the business cycle. During economic downturns or recessions, demand for goods and services decreases, leading to a decline in production and job layoffs. In a full employment scenario, where the economy is operating at its potential output, cyclical unemployment is minimized or non-existent.
Demand-Deficient (Keynesian) Unemployment: Also known as deficient-demand unemployment, it occurs when the aggregate demand for goods and services is insufficient to create full employment. In the absence of an output gap, where the economy is producing at its maximum capacity, demand-deficient unemployment is mitigated as there is no deficiency in overall demand to cause widespread joblessness.
When there is no output gap (full employment), the types of unemployment that do not exist are cyclical unemployment and seasonal unemployment. Cyclical unemployment occurs when there is a downturn in the business cycle and output is below potential GDP. Seasonal unemployment happens when certain industries or jobs experience predictable fluctuations based on the time of year, such as agriculture or tourism. In full employment, these types of unemployment are not present as the economy is operating at its maximum potential.