-Using the graph above, if the demand and supply of pounds are D1 and S1, identify the equilibrium exchange rate. Explain why a higher or lower exchange rate won't last very long.
Definitions:
Full-employment GDP
Full-employment GDP is the maximum potential output an economy can produce when all resources, including labor, are fully utilized without causing inflation.
Capitalist Economy
A financial system where capital goods are owned by individuals or corporations, with investment choices, prices, production, and goods distribution primarily influenced by competition within a free market.
Automatic Stabilizer
Economic policies and programs, like unemployment benefits, that automatically adjust to counteract economic fluctuations without additional government action.
Unemployment Compensation
Government-provided financial assistance to individuals who are unemployed and meet certain eligibility requirements.
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