To arrive at a complete theory of exchange rate determination, we use:
a. the short-run monetary approach, the long-run monetary approach, and a good dose of common sense.
b. the short-run asset approach, the long-run monetary approach, and real interest parity.
c. real-world phenomena such as sticky prices, government inefficiency, and imperfect markets.
d. information on financial markets, political realities, and the large government debt.
Ans: b. the short-run asset approach, the long-run monetary approach, and real interest parity.
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