Option 1 -> Incorrect. Full employment doesn't mean zero unemployment; natural unemployment always exists.
Option 2 -> Not related to full employment definition. This refers to investment levels.
Option 3 -> Correct definition. Full employment means optimal utilization of all productive resources.
Option 4 -> Excessive demand causes inflation, not full employment.
Hence, Option 3: all the factors of production are fully employed in the production process -> Full employment level is an economic condition where all available factors of production (land, labor, capital, and entrepreneurship) are being utilized at their optimal capacity. It doesn't mean zero unemployment, as frictional and structural unemployment can still exist. At this level, the economy operates at its potential GDP, producing maximum output without causing inflationary pressures. -> correct