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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
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 B's currency (B$) is twice that of the country A's currency (A$). 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?
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