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1. Attainment of Full Employment. Full employment refers to a situation in which every able bodied person who is willing to work at the prevailing

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1. Attainment of Full Employment. Full employment refers to a situation in which every able bodied person who is willing to work at the prevailing rate of wages is, infact, employed. Alternatively, it is a situation when there is no involuntary unemployment. It is not possible due to structural factors (lacking necessary skills) and frictional factors (not being aware of the available job opportunity}. Monetary policy can raise the level of employment by encouraging credit to labour intensive sectors like rural agriculture. In addition a policy that lowers the rate of interest constitutes expansionary monetary policy and it is likely to lead to increased investment and hence more employment opportunities

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