Topic 3

Question 1

What is seigniorage?

Answer 1

the profit gained from issuing coinage (the minting of monies costs less than the actual value of the coinage)

Question 2

What are 6 determinants of exchange rates?

Answer 2

1. Balance of Payments
2. International Parity conditions
3. Monetary approach
4. Asset Market Approach
5. Technical Analysis
6. Efficient Market Approach

Question 3

What is the law of one price?

Answer 3

The law of one price (LOOP) says that the price of a good, when denominated in a particular currency, should be the same wherever in the world the good is being sold.