If 1 dollar = 5 gram of gold and 1 pound = 10 gram of gold, then the exchange rate would be 1 pound = 2 dollar. Which of the following exchange rates are we taking about?
Answer & explanation
Correct answer: option 1
According to "Gold standard system of exchange rate", gold was taken as the common unit of parity between currencies of different countries. Every country defined its value in terms of gold.