Use the money market and FX diagrams to answer the following questions about the relationship between the British pound () and the U.S. dollar ($). The exchange rate is in U.S. dollars per British pound, (Es). We want to consider how a change in the U.S. money supply affects interest rates and exchange rates. Each graph is marked with the original equilibrium as point A, where the interest rate is is' and the dollar to pound exchange rate is el. a. Illustrate how a temporary increase in the U.S. money supply affects the money and FX markets by shifting the appropriate curves. Label your short-run equilibrium point B. Move point C to indicate the long-run equilibrium point. Money Market Foreign Exchange Market MS US B B O DR U.S. interst rate Expected Return MD FR MS TTTTT TTTTTTTT TTTT Use the money market and FX diagrams to answer the following questions about the relationship between the British pound () and the U.S. dollar ($). The exchange rate is in U.S. dollars per British pound, (Es). We want to consider how a change in the U.S. money supply affects interest rates and exchange rates. Each graph is marked with the original equilibrium as point A, where the interest rate is is' and the dollar to pound exchange rate is el. a. Illustrate how a temporary increase in the U.S. money supply affects the money and FX markets by shifting the appropriate curves. Label your short-run equilibrium point B. Move point C to indicate the long-run equilibrium point. Money Market Foreign Exchange Market MS US B B O DR U.S. interst rate Expected Return MD FR MS TTTTT TTTTTTTT TTTT