Suppose that the Fed unexpectedly decreases the money supply in the U.S. Use the overshooting approach to explain how the spot exchange rate, forward rate, domestic interest rate, and the domestic...

Suppose that the Fed unexpectedly decreases the money supply in the U.S. Use the overshooting approach to explain how the spot exchange rate, forward rate, domestic interest rate, and the domestic price level would change in response to the policy change. Draw graphs to illustrate the time paths of the adjustments.