February 22, 2017

Homework Help: Macroeconomics

Posted by animal on Wednesday, May 21, 2008 at 12:06am.

Explaining Exchange Rates

Suppose that under the Bretton Woods system, the dollar is pegged to gold at a rate of $35 per ounce and the pound sterling is pegged to the dollar at a rate of $2 = £1.

If the dollar is devalued against gold and the pegged rate is changed to $40 per ounce, what does this imply for the exchange value of the pound? Explain your answer.

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