The starting point for understanding how exchange rates are determined is a simple idea called ________,which states: if two countries produce an identical good,the price of the good should be the same throughout the world no matter which country produces it.

Question

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The law of one price states that identical goods should have the same price throughout the world, regardless of the country of production. This forms the basis for determining exchange rates between different currencies.

The Starting Point for Understanding How Exchange Rates Are Determined