The starting point for understanding how exchange rates are determined is a simple idea called ________,which states that 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.

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The law of one price states that identical goods should have the same price throughout the world, regardless of where they are produced. This serves as the starting point for understanding how exchange rates are determined. Gresham's law refers to the tendency for bad money to drive out good money, while purchasing power parity is the theory that exchange rates should adjust to equalize the purchasing power of currencies in different countries. Arbitrage refers to the practice of buying and selling securities or currencies in order to profit from price imbalances in different markets.

The Starting Point for Understanding How Exchange Rates Are Determined