The Australian dollar (AUD) started to appreciate against the US dollar (USD), after the RBA increased the cash rate on 4^th May 2022. Explain why and how the AUD has been appreciating in reaction to the RBA monetary policy action. Your answer must include the actions financial investors in Australia and the United States. You may use the flexible exchange rate diagram above to illustrate your answer. Assume the initial equilibrium point is A. (8 marks).

Part C: What would be the impact of the appreciating AUD on net exports (NX) in Australia and the United states, ceteris paribus? Briefly explain. (2 marks)