Under the gold standard, the official exchange rate would be $2.80 per pound as long as the United States bought and sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce.

Question

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Under the gold standard, the exchange rate between two countries would be determined by their respective gold prices. In this case, the US bought and sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce, resulting in an official exchange rate of $2.80 per pound.

Under the Gold Standard, the Official Exchange Rate Would Be