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Suppose that the British pound is pegged to gold at 6 per ounce, whereas one ounce of gold is worth 12. Under the gold standard,

Suppose that the British pound is pegged to gold at 6 per ounce, whereas one ounce of gold is worth 12. Under the gold standard, any misalignment of the exchange rate will be automatically corrected by cross-border flows of gold. Calculate the possible gains for buying 1,000, if the British pound becomes undervalued and trades for 1.80. (Assume zero shipping costs).

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