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Chapter 33: Q. 12 (page 753)

Suppose that under a gold standard, the U.S. dollar is pegged to gold at a rate of 535 per ounce and the pound sterling is pegged to gold at a rate of $17.50 per ounce. Explain how the gold standard constitutes an exchange rate arrangement between the dollar and the pound. What is the exchange rate between the U.S. dollar and the pound sterling?

Short Answer

Expert verified

With the Us dominion greenback or the major currencies, the converting price becomes0.5poundsterling.

Step by step solution

01

Introduction

A translation index is a function about how one asset is transferred for someone in the finance sector. National currencies are the most prevalent, but they can also be subnational, as in Hong Kong, or supranational, as with the euro.

02

Given Information

A rate of 535per ounce and the pound sterling is pegged to gold at a rate of $17.50per ounce.

03

Explanation

Funds theories is designed to be more than an interest expenses over currencies with commodities. This shows that the country uses has rate of exchange, for which the state decides the dollar's value in bullion.

Approximate trade balance against it's currency or the currency Henderson:

He gained also as a reward.

$35=1ounce

拢17.50=1ounce

S35=拢17.50

1USD=17.5035

=0.5poundsterling

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