.Suppose that the demand for money in Home permanently decreases due to innovations in financial markets.

(a) Use the money market and FX diagrams to illustrate and explain how this affects the money market in Home and FX market in the short run.

(b) Use the money market and FX diagrams to illustrate and explain how a permanent decrease in Home's money demand affects the money market and FX market in the long run.

(c) Do the explanations for (a) and (b) provide an explanation for the excessive volatility of exchange rate movements in the short run?