Suppose that under the gold standard, there was 1 5 ounce of gold in a U S dollar and 1 ounce of gold in a British pound Demonstrate that if the exchange rate between the dollar and the pound was $4 1 rather than $5 1, you could make unlimited profits by buying gold in one country and selling it in...

With the 4 1 exchange rate you would buy gold in Londo ...

Suppose that under the gold standard, there was 1/5 ounce of gold in a U.S. dollar and

Question:

Suppose that under the gold standard, there was 1/5 ounce of gold in a U.S. dollar and 1 ounce of gold in a British pound. Demonstrate that if the between the dollar and the pound was $4 = £1 rather than $5 = £1, you could make unlimited profits by buying gold in one country and selling it in the other. If the was $6 = £1, how would your strategy change? For simplicity, assume that there was no cost to shipping gold from one country to the other.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...