Under the Gold Standard, currencies are pegged to gold. The price of gold in the UK is 6 per ounce, while in the United States it costs $36 per ounce. If the official exchange rate between pounds and U.S. dollars is $4 = 1.

a.Is there any arbitrage profit to be made? Explain (0.5 mark)

b.What steps need to be done to capture the arbitrage if any? (1 mark)

c.What prevents the arbitrageurs to capture the profit? (0.5 mark)