The price of gold is $300 per ounce in New York and 2,550 pesos per ounce in Mexico City. If the law of one price holds for gold, the nominal exchange rate is ________ pesos per U.S. dollar.
A)0.118
B)1.18
C)8.5
D)85.5

Question

Quizplus · Accepted Answer

If the law of one price holds, which we expect, then 2,550 pesos/ 300 dollars = 8.5 pesos per dollar should be the relative value of the two currencies.

The Price of Gold Is $300 Per Ounce in New