Under the gold standard the fixed price of gold was $20.67 per ounce in the United States.

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Under the gold standard the fixed price of gold was $20.67 per ounce in the United States. The fixed price of gold was £4.2474 per ounce in Britain.

a. What is the “fixed” exchange rate (dollars per pound) implied by these fixed gold prices?

b. How would you arbitrage if the exchange rate quoted in the foreign exchange market were $4.00 per pound? (Under the gold standard, you could buy or sell gold with each central bank at the fixed price of gold in each country.)

c. What pressure is placed on the exchange rate by this arbitrage?

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International Economics

ISBN: 9780078021770

16th Edition

Authors: Thomas Pugel

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Question Posted: Mar 23, 2024 10:00 AM

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Under the gold standard the fixed price of gold was $20.67 per ounce in the United States.

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a The implied fixed exchange rate is about 487pound or 206742474 b You would ...View the full answer

International Economics

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