Multiple Choice
Under the gold standard system, if the par exchange rate is $1 = 2 pounds, but the market exchange rate in the United Kingdom is $1 = 1 pound, then a person interested in arbitrage would:
A) buy dollars in the United Kingdom to be shipped to the United States and exchanged for a larger quantity of gold.
B) find that it is not possible to engage in arbitrage.
C) convert dollars into pounds in the United States and sell it for gold in the United Kingdom.
D) lose money by trying to exploit any price difference.
Correct Answer:
Verified
Correct Answer:
Verified
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