Question

Suppose that Britain pegs the pound to gold at six pounds per ounce, whereas the exchange rate between pounds and U.S. dollars is $5 = £1. What would an ounce of gold be worth in U.S. dollars?

Answer 1

Answer:

$30

Step-by-step explanation:

The question says that one ounce costs £6. Now we need to find out what £6 is in dollars. To do this we use the ratio based on the exchange rate:

£1 : $5

£6 : x

then we cross multiply

x = $30

So one ounce of gold costs £6 or $30