please show your work clearly.

i Chrome File Edit View History Bookmarks People Tab Window Help ,, W @QQi r 7,, O O 0 MyAcaden x | (0: Files x 9 Problems x (0: Files x | ..|| Econ182[ x | m ECON136 x 3 one usd in x | H 221mm: x l u Homework x l 0 (2) Facebo x | + 6 9 C' 0 File I [Users/jungtaekchoi/Downloads/Problem%20$et%204.pdf Q 7} m at i?) G I 5 Apps M Gmail B YouTube '1 Maps Q Translate G: Assignment7M.4. e FELLEZS Silenced.\" a 05 61A (137 unrea.., Problem Set 4,pdf On Jan. 15, 2015, the Swiss National Bank surprised the market by announcing the end of its currency peg with the euro. In other words, the SNB announced that it would give up its commit ment to supply enough Swiss francs (CHF) to meet the market demand. This question investigates the exchange rate behavior between CHF and USD by considering the policy shock as a permanent 1 reduction in Swiss money supply. a. What are the main assumptions we made in our analysis of money supply and exchange rate in the short run? How are these assumptions different for the long-run? b. Consider Switzerland as the home country and the U.S. the foreign country. Assumptions: no change in the foreign monetary policy, the Swiss economy starts with all variables at their longrun levels, and home output remains constant as the economy adjusts to the money supply change. Use the two-sided diagram that depicts the money market equilibrium and the foreign exchange market equilibrium to show the short-run eects of the permanent reduction in Swiss money sup ply. Provide brief economic explanations following the graph and make sure to include and explain the concept of exchange rate overshooting. c. Using a similar diagram, show the long-run eects of this permanent reduction in money supply' What happens to the Swiss price level and interest rate? What about the exchange rate between the Swiss Franc and the US dollar? 1\"'@i3%0a@