In a Full Employment Equilibrium, a decrease in a major trading partner's economic activity will always lead to a decrease in domestic aggregate demand, thereby causing unemployment to rise in the domestic economy.

Full Employment Equilibrium happens when all people who want to work can find jobs, and the economy is producing at its maximum potential. If a major trading partner, like another country, experiences a decrease in economic activity, they will likely buy fewer goods and services from us. This drop in demand for our exports means that businesses may produce less, leading to layoffs or reduced hiring. As a result, domestic unemployment can rise because fewer jobs are available. For example, if a country that imports a lot of cars from us slows down its economy, our car manufacturers might have to cut back on production and lay off workers.