Part 3 - explain

3. Money Demand and the Nominal Exchange Rate. [20 points] Suppose that the real demand for money in China is given by the following function: LOCK) = 70 + 71Y 72R where Y is the Chinese real national income, yo, 3/1 and 7/2 are positive parameters, and R is the interest rate of the non-monetary assets. Assume that a series of debit card fraud in China leads to a temporary increase in yo, so the real demand for money raises. Use the money market and the foreign exchange market models to describe how this increase in yo, affects the real demand of money, the Chinese interest rate, and the nominal and real exchange rates between the Chinese Renminbi and the US. dollar in the short run? Support your answer with a graph of the money market and foreign exchange market and explain carefully