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Vera_Pavlovna [14]
3 years ago
11

Prior to the 1870s, both gold and silver were used as international means of payment and the exchange rates among currencies wer

e 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 9 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?
Business
1 answer:
SashulF [63]3 years ago
4 0

Answer:

the exchange rate between U.S. dollar and German mark be under this system will be of 3 U$D = 1 german mark

Explanation:

We will use gold and silver as a mean to equalize both currencies:

<u>First equivalence between silver and gold:</u>

90 francs = 1 ounce of gold

9 franc = 1 ounce of silver

90/9 = 10 ounce of silver equals 1 ounce of gold.

<u>Now, we convert the german mark to gold:</u>

1 german mark = ounce of silver

10 german mark = ounce of gold.

<u>Finally, we equalize with the US dollars:</u>

30 dollar = ounce of gold = 10 german mark

30 dollars = 10 german mark

3 dollars = 1 german mark

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