Exchange Kate DD Real GNP Yo Consider the accompanying graphic' The path of adjustment, from point Am the equilibrium point, can be described as: D the return on foreign assets (in domestic currency terms) will fall until interest parity is achieved; domestic interest rates will then fall as domestic inoomeioutput falls until we arrive at the equilibrium point. D the exchange rate rst adjusts to its short-run equilibrium value, and then incomeioutput falls to its short-run equilibrium value all the while the asset market is in equilibrium and interest parity is maintained. D the return on foreign assets (in domestic currency terms) will rise until interest parity is achieved; domestic interest rates will then rise as domestic incomeioutput falls until we arrive at the equilibrium point. D the return on foreign assets (in domestic currency terms) will fall until interest parity is achieved; domestic interest rates will then rise as domestic incomefoutput falls until we arrive at the equilibrium point. D the return on foreign assets (in domestic currency terms) will rise until interest parity is achieved; domestic interest rates will then fall as domestic incomefoutput falls until we arrive at the equilibrium point