What is likely to be the impact of efforts towards reducing unemployment on the production potential of the economy? Explain.

Explanation

(i) The economy moves towards the full employment, thereby removes unemployment.
(ii) This can be done when government starts employment generation schemes. By this, economy moves towards full employment and production potentiality of an economy increases.
(iii) It can be explained with the help of the following diagram. In the given figure, from unemployment (U), we are moving towards full employment (F).