You run a small business named Thornbeck located in Wulfland. Your business model involves importing raw materials and then producing goods that are exclusively sold within Wulfland domestic market. The currency of Wulfland is the shireling (WSL). Recently, the WSL has been depreciating against major global currencies like the US Dollar (USD), Euro, Japanese Yen, and British Pound.

Here's a summary of the WSL's performance against the USD in recent months: June 2023: 1 USD = 4 WSL September 2023: 1 USD = 6 WSL In October '23, when 1 USD equaled 7 WSL, Wulfland's central bank decided to increase interest rates to prevent WSL from losing further value against the USD and other major currencies. The move by Wulflands central bank was successful: as soon as the interest rates were raised, WSL stabilized and ceased its decline in value.

a. Explain the relationship between the interest rates and WSLs value. Why does an interest rate increase in Wulfland prevent WSL from losing value against other currencies?

b. How does the interest rate increase and the subsequent stabilization of WSLs value impact Thornbeck? Is the new high interest environment in Wulfland a positive development for your business, or a negative one? Why? Explain in detail.