Question $3.$ Exchange Rates in the Short$-$run: The Asset Approach.

Please, explain how a permanent decrease in domestic money supply could result in exchange rate overshooting. Use the money market and FX diagrams to support your arguments. On all graphs, label the initial equilibrium point A$.$

$($a$)$ Illustrate how a permanent decrease in money supply affects the money and FX markets. Label your short$-$run equilibrium point B and your long$-$run equilibrium point C$.$ Briefly comment.

$($b$)$ By plotting them on a chart with time on the horizontal axis, illustrate how each of the following variables changes over time $($for the domestic economy$)$: nominal money supply M$,$ price level P$,$ real money supply M$/$P$,$ nominal interest rate i$,$ and the exchange rate E$.$

$($c$)$ Is PPP consistent with overshooting? Why?