The central bank of the US increases its interest rate in order to improve its balance of payments position. The diagram illustrates the resulting changes in the demand for, and supply of, US$ in the foreign exchange market. How should curves W, X, Y and Z be labelled to show the impact of the interest rate rise on the exchange rate? (Assume a change is shown by a move from a curve numbered 1 to a curve numbered 2.)
- 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