The diagram illustrates how the floating exchange rate is determined between the US$ and the UK£. D represents the demand curve for pounds and S represents the supply curve for pounds. The starting equilibrium exchange rate is E. Which change could lead to a rise in the UK exchange rate?
- Aa switch by US consumers from chocolate produced in the UK to chocolate produced in the US
- Ba switch in the destination of UK tourists from Africa to the US
- Ca wheat crop failure in the UK leading to increased wheat imports from the US
- Dincreased investment by US residents in financial and real assets in the UK