Prior to the 1870s,both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents.Suppose that the dollar was pegged to gold at $30 per ounce,the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver,and the German mark pegged to silver at 1 mark per ounce of silver.What would the exchange rate between the U.S.dollar and German mark be under this system?

Question

Quizplus · Accepted Answer

The correct answer is A. 1 German mark = $2.Explanation:The exchange rate between the U.S. dollar and German mark can be determined by comparing their respective gold or silver contents. Since the dollar is pegged to gold at $30 per ounce and the German mark is pegged to silver at 1 mark per ounce of silver, we can calculate the exchange rate as follows:1 ounce of gold = $301 ounce of silver = 6 francs1 mark = 1 ounce of silverTherefore, 1 mark = 6 francsTo convert francs to dollars, we need to know the exchange rate between the franc and the dollar. Since the French franc is pegged to gold at 90 francs per ounce, we can calculate the exchange rate as follows:1 ounce of gold = 90 francs1 ounce of gold = $30Therefore, 1 franc = $30/90 = $0.333Now we can calculate the exchange rate between the dollar and the mark:1 mark = 6 francs1 franc = $0.333Therefore, 1 mark = 6 x $0.333 = $2

Prior to the 1870s,both Gold and Silver Were Used as International