Creating full employment is associated with which economic outcome?

The association between creating full employment and increasing inflation rates stems from the dynamics of supply and demand in the economy. Full employment occurs when all individuals who are willing and able to work can find employment. When the labor market tightens due to a high level of employment, businesses may face a shortage of workers. This can drive up wages as employers compete to attract employees.

As wages increase, individuals have more disposable income, leading to higher consumer spending. Increased consumer spending can boost demand for goods and services, which might exceed supply, resulting in upward pressure on prices. Consequently, this scenario can lead to increased inflation rates as businesses raise prices to manage the higher costs and demand.

It's important to note that the other options, while relevant economic concepts, do not reflect the direct relationship established between full employment and its potential effect on inflation. Decreasing consumer spending typically occurs in a recession, rising levels of savings could be influenced by various factors but are less directly tied to full employment, and stabilizing price levels would generally be a priority for central banks but may not be achieved in a high-employment environment.