The US central bank reduces its interest rate. This affects the exchange rate of the US$. The diagram illustrates the resulting changes in both the demand for and supply of US$ in the foreign exchange market. A change is shown by a movement from a curve numbered 1 to a curve numbered 2. What should curves W, X, Y and Z be labelled to show the effect of the fall in interest rates on the exchange rate?
- AW: S1, X: S2, Y: D1, Z: D2
- BW: S1, X: S2, Y: D2, Z: D1
- CW: S2, X: S1, Y: D1, Z: D2
- DW: S2, X: S1, Y: D2, Z: D1