Problem
1. Briefly explain the differences between a flexible exchange rate system and a fixed exchange rate system.
2. Suppose that under a gold standard, the U.S. dollar is pegged to gold at a rate of $35 per ounce and the pound sterling is pegged to gold at a rate of £17.50 per ounce. Explain how the gold standard constitutes an exchange rate arrangement between the dollar and the pound. What is the exchange rate between the U.S. dollar and the pound sterling?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.