Suppose the U.S.dollar is defined by law as being equal to 0.1 ounce of gold.Further suppose the British pound is defined as being equal to 0.05 ounce of gold.The implied exchange rate between the pound and the dollar is

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Since the dollar is defined as 0.1 ounce of gold and the pound is defined as 0.05 ounce of gold, we can see that 2 pounds is worth the same amount of gold as 1 dollar. Therefore, the exchange rate between the pound and the dollar is fixed at $1 = 2 pounds.