Under the gold standard, if the dollar price of gold is pegged at $35 per ounce and the euro price of gold is pegged at 12 euro per ounce, what is the dollar/euro exchange rate?
What will be an ideal response?
The dollar/euro exchange rate must be constant and equal to
($35 per ounce) / (12 euro per ounce) = $2.92 per euro.
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