1. Analyse the Dornbusch model of exchange rate overshooting, including its equations and key diagram. [18 marks]
2. Using the diagram in part (a) above (use the same diagram, no need to re-draw), analyse the effects of rise in output (because, e.g., productivity has increased). Explain carefully and intuitively the transition from the old to the new equilibrium. [15 marks]

Please give diagram also