Suppose the U.S.dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold.The exchange rate between the U.S.dollar and the British pound equals ________ per pound.
A)$0.50
B)$1.00
C)$1.50
D)$2.00

Question

Quizplus · Accepted Answer

The British pound is backed by twice as much gold as the U.S. dollar (1/3 ounce vs. 1/6 ounce). Therefore, it takes 2 U.S. dollars to equal 1 British pound, making the exchange rate $2.00 per pound.