Question: Suppose that under the gold standard, there was 1/5 ounce of gold in a U.S. dollar and 1 ounce of gold in a British pound.

Suppose that under the gold standard, there was 1/5 ounce of gold in a U.S. dollar and 1 ounce of gold in a British pound. Demonstrate that if the between the dollar and the pound was $4 = £1 rather than $5 = £1, you could make unlimited profits by buying gold in one country and selling it in the other. If the was $6 = £1, how would your strategy change? For simplicity, assume that there was no cost to shipping gold from one country to the other.

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