This question is related to the price-specie flow mechanism theory. Imagine two countries (A and B) operate in the Gold Standard era. The gold content of the country Bs currency (B$) is twice that of the country As currency (A$). The transportation cost of the gold content of one unit of currency $B is A$0.05.

i) What is the price range within which the exchange rate S(A$/B$) (e.g., the price of $B in terms of $A) can fluctuate without triggering gold arbitrage?

ii) Assume the exchange rate market is in equilibrium. Suppose that country B is experiencing a remarkably high economic growth and as a result, there is a massive increase in its demand for country As goods. Will this increase in the demand create a persistent imbalance of payments between two countries? Explain.