Exchange Rate Determination Theory: Overshooting Exchange rate overshooting refers to the process in which the movement of the exchange rate reacts more than the long-term equilibrium state in the short run when a currency volume shock occurs. Answer the following questions. (1) Illustrate and explain the short-term and long-term effects of the increase in the home country's money supply on the local currency volume, the local interest rate, and the exchange rate (the Korean won's exchange rate against the dollar) in a two-country model in which both countries (Korea) and foreign (US) exist. (2) In the problem above (1), picture the movement of nominal currency volume, price level, interest rate, exchange rate, and real currency volume over time (i.e., time path) after the domestic currency volume was moderate..