What is a necessary condition for the economy to achieve full-employment GDP?

A necessary condition for the economy to achieve full-employment GDP is flexibility in wage adjustments. Full-employment GDP represents the level of output where all resources, particularly labor, are utilized efficiently, without cyclical unemployment. When wages can adjust flexibly in response to labor market conditions, they can help match supply and demand for labor.

If wages are too rigid (either inflexible downwards or upwards), it may lead to persistent unemployment or labor shortages, as employers might not be able to hire the necessary amount of workers, or might be constrained from laying off workers they no longer need. Flexible wages allow for equilibrium in the labor market, facilitating movement towards full employment.

While stability in commodity prices may impact business planning and investment, it is not a direct condition for achieving full-employment GDP. Changes in consumer preferences can influence overall demand and resource allocation but do not inherently determine the employment level. Increased government spending can stimulate demand and potentially create jobs, but it is not a direct requirement for achieving full employment as it does not address the structural aspects of labor market adjustment like wage flexibility does.