This question compares the effects of temporary and permanent shocks to the money supply. In answering it, define the exchange rate as U.S. dollars per Chinese yuan, E_$/¥

a. Illustrate the short-run and the long-run effects of a temporary increase in the U.S. money supply.

b. Compare the two cases above (equations (b) and (c) in terms of exchange rate overshooting. Define exchange rate overshooting and state whether each type of shock (temporary and permanent) leads to exchange rate overshooting, referring to your previous diagrams.