1. The Asset Approach to Exchange Rates Use the money Market and FX diagrams to answer the following questions about the relation- ship between the British pound () and the USD, $. The exchange rate is in USD per British pound, Es/. We want to consider how a change in the US money supply affects interest rates and exchange rates. On all graphs, label the initial equilibrium point, A. a. [10 pts) Illustrate how a temporary decrease in the US money supply affects the money and FX markets. Label your short run equilibrium point C. b. [10 pts] Using your diagram from a.) state how each of the following variables changes in the short run increase/decreaseo change), US interest rate, British interest rate, E$/, and the US price level. Eg/ 1. The Asset Approach to Exchange Rates Use the money Market and FX diagrams to answer the following questions about the relation- ship between the British pound () and the USD, $. The exchange rate is in USD per British pound, Es/. We want to consider how a change in the US money supply affects interest rates and exchange rates. On all graphs, label the initial equilibrium point, A. a. [10 pts) Illustrate how a temporary decrease in the US money supply affects the money and FX markets. Label your short run equilibrium point C. b. [10 pts] Using your diagram from a.) state how each of the following variables changes in the short run increase/decreaseo change), US interest rate, British interest rate, E$/, and the US price level. Eg/