6. This question refers to the asset approach in the short run. Use the following graphs to answer this question. (a) Home Money Market (b) FX Market Nominal Expected interest rate, is MS returns 2. ... determines home 3. ...which equals nominal interest rate in the domestic return in the money market... the FX market. DR 4. Equalization of domestic and foreign MD returns determines E. FR 1. Home real Real money Pus balances, Mus/ Pus Exchange money supply... rate, Es/e a. Explain why the money demand curve (MD) is downward-sloping. b. Suppose the Fed decides to temporarily decrease U.S. money supply. Graphically illustrate how the temporary decrease in the U.S. money supply affects both the money market and the FX market in the short run. Will the dollar appreciate or depreciate? Explain. (10 )