This is the level at National Income at which everyone who wants to work is able to. There is in other words sufficient demand to employ everyone. Classical economists argued that the economy would automatically tend to this equilibrium, whereas Keynesians said that it was the role of government, through their policy, to ensure we got there. If the government sell more long-term securities then this will reduce the bank's liquidity. This in turn will reduce their ability to lend more.
Funding therefore acts as a contractionary monetary policy .
Over-funding is when the government sell more securities than necessary. This also is a contractionary monetary policy.