Prior to the 1870s, both gold and silver were used as international means of pay

Question

Prior to the 1870s, both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents. Suppose that the dollar was pegged to gold at $30 per ounce, the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver, and the German mark pegged to silver at 1 mark per ounce of silver. What would the exchange rate between the U.S. dollar and German mark be under this system? A. 1 German mark $2 B. 1 German mark= $0.50 C. I German mark= $3 D. I German mark= $1 17.

Explanation / Answer

1 mark = 1 ounce of silver

1 ounce of silver = 6 francs

6 francs = 6 / 90 ounce of gold

6 / 90 ounce of gold = 30 x 6 / 90 = $2

=> 1 German mark = $2.

Hence, A is correct.

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