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please answer this question as soon as possible thank you Use the money market and FX diagrams to answer the following questions about the rela-

please answer this question as soon as possible thank you

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Use the money market and FX diagrams to answer the following questions about the rela- tionship between the U.S. dollar ($) and the euro (). The exchange rate is in U.S. dollars per euro. Suppose that the real money demand in the United States decreases. (at) Cb) (C) Suppose that the decrease in the U.S. real money demand is temporary (the real money demand curve returns to its original level). Using the FX and money market diagrams, illustrate how this change affects the money and FX markets. Label the initial equilib- rium as point A, label your short-run equilibrium as point B and your long-run equilib- rium as point C. (6 points) Assume this change in U.S. real money demand is permanent. Using a new diagram, illustrate how this change affects the money and FX markets. Label the initial equilib- rium as point A, label your short-run equilibrium as point B and your long-run equilib- rium as point C. (8 points) By plotting them on a chart with time on the horizontal axis, illustrate how each of the following variables changes over time in response to a permanent reduction in the real money demand: nominal money supply MUS, price level Pas, real money supply MUS/PUS U.S. interest rate 13, and the exchange rate Ewe. Denote period T, as the period when the real money demand changed, and clearly show what happens to each of the variables in the long run (i.e. if they return to their initial level or converge to a new one). (10 points)

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