Suppose that the exchange rate between the British pound and gold was £20 per ounce of Jgold and the exchange rate between the U.S. dollar and gold was $80 per ounce of gold. What is the U.S. dollar exchange rate with respect to the British pound?

Question

Quizplus · Accepted Answer

To determine the U.S. dollar exchange rate with respect to the British pound, we need to compare the exchange rate between the U.S. dollar and gold to the exchange rate between the British pound and gold. We can do this by dividing the U.S. dollar exchange rate by the British pound exchange rate:

$80/£20 = $4/£1

Therefore, $1 exchanges for £0.25.

Suppose That the Exchange Rate Between the British Pound and Gold