Full employment means unemployment is very low. There may be some frictional unemployment but generally those looking for work are able to find it. It also means the economy is operating close to, or at full capacity.
To attain full employment the government could seek to increased aggregate demand. This increases real GDP and reduces cyclical unemployment; however as the economy gets close to full capacity it may cause inflationary pressures; causing inflation to be above target. Yet increases in the demand for labour continues to grow and employers must pay existing workers overtime and entice non-labor force participants into the labor force by offering them higher wages. As wages increase, more people are willing to work but production costs rise. If strong economic growth persists, wages pressures continue to build, leading to increasing inflation (cost-push inflation). On the other hand, unemployment provides potential for the economy to expand and can act as a downward pressure on inflation. Furthermore expansionary fiscal policies will cause higher consumer spending and therefore a rise in imports; this causes a current account deficit. This is particularly a problem in the UK, where consumers have a high Marginal propensity to consume imports.
However, it is possible to attain full employment through different approaches. To reduce unemployment, the government may implement supply side policies. For example, making labour markets more flexible, increasing incentives to work, better education and training e.t.c. These policies can reduce the natural rate of unemployment without causing inflation. In fact some supply side policies which increase productivity may actually help to reduce inflation. Also, if the policies are successful in increasing pr ...