Please see the attachment and complete the question. Problem: The Asset Approach and Exchange Rate Overshooting

Problem: The Asset Approach and Exchange Rate Overshooting a) Using time-plots, illustrate the effects on the short-run and long-run equilibrium values of the following variables. Be careful to show clearly how the long run value relates to the short run and initial values. (T is the point in time when the permanent rise in U.S. money demand starts. You might find it helpful to first draw on your own the money market and foreign exchange market graphs with all curve shifts. But points will be awarded based on the time plots below.) Now, you fill in the time plots for the variables below: 1. Nominal exchange rate 2. Dollar interest rate 3. U.S. real money supply 4. Real exchange rate 5. Expected future exchange rate 6. expected foreign (peso) returns b) Define ‘exchange rate overshooting,’ and describe how you see it in the time plots above c) Why did we bother learning this theory – what important feature of the foreign exchange market can the theory explain? d) Explain how to see the effect of Purchasing Power Parity in your time plots above e) Explain how to see the effect of uncovered interest pate parity (UIP) in the time plots above.