Refer to the Diagram, Where D and S Are the United

Multiple Choice

Refer to the diagram, where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. Under a system of fixed exchange rates, the shift in demand from D to D' will require the United States to

A) increase its foreign exchange reserves.
B) increase the domestic money supply of dollars.
C) reduce its foreign exchange reserves.
D) appreciate the Swiss franc.