di YOU DO NOT HAVE TO DRAW ANY GRAPH FOR THIS QUESTION. NO GRAPH IS OBLIGATORY TO SUBMIT. BUT IF YOU LIKE YOU CAN ADD THEM. Use the foreign exchange and money market diagrams to answer the following questions about the relationship between the British pound and the US dollar. Let the exchange rate be defined as U.S dollar per British pound Edollar/Epound. We want to consider how a change in the US money supply affects interest rates and exchange rates, Imagine on all graphs, initial equilibrium point A is labeled a. Explain how a temporary decrease in the US money supply affects the money and FX markets. What happens the short-run equilibrium point B and long-run equilibrium point C.(5p) B. Using your explanation from (a) state how each of the following variables changes in the short-run increase/decreaseo change) US interest rate. British interest rate, Edollar/Epound, Edollar/Epound and the US price level.(5) sind your explanation from (a), state how each of the following variables changes in the long-run increasel decrease no change relative to their initial values at point A): U.S interest rate, British interest rate Edirne Edoard/Ebound and the US price level (5p) di YOU DO NOT HAVE TO DRAW ANY GRAPH FOR THIS QUESTION. NO GRAPH IS OBLIGATORY TO SUBMIT. BUT IF YOU LIKE YOU CAN ADD THEM. Use the foreign exchange and money market diagrams to answer the following questions about the relationship between the British pound and the US dollar. Let the exchange rate be defined as U.S dollar per British pound Edollar/Epound. We want to consider how a change in the US money supply affects interest rates and exchange rates, Imagine on all graphs, initial equilibrium point A is labeled a. Explain how a temporary decrease in the US money supply affects the money and FX markets. What happens the short-run equilibrium point B and long-run equilibrium point C.(5p) B. Using your explanation from (a) state how each of the following variables changes in the short-run increase/decreaseo change) US interest rate. British interest rate, Edollar/Epound, Edollar/Epound and the US price level.(5) sind your explanation from (a), state how each of the following variables changes in the long-run increasel decrease no change relative to their initial values at point A): U.S interest rate, British interest rate Edirne Edoard/Ebound and the US price level (5p)