If production results in income and income is the source of

“If production results in income and income is the source of spending, it would seem that the production of a full-employment economy would automatically guarantee enough spending to sustain itself. How, then, can unemployment occur?” Explain in detail

Solution

for full employment economy, the businesses need to pay wages of the people employes, cover healthcare, pension etc. but many of thse jobs can be done by machines and automatation brings efficiency and reduces cost of production and causes decrease in available jobs, hence even if production results in income and income is asource of spending, there is no possibility of full employment economy because there aren\'t enough jobs.