Suppose the Bank of Canada Fixes the Canada-U

Multiple Choice

Suppose the Bank of Canada fixes the Canada-U.S.exchange rate between the limits of Cdn$1.10 and Cdn$1.20 to the U.S dollar.If the free-market equilibrium exchange rate would otherwise be Cdn$1.25,then the

A) Bank of Canada needs to engage in expansionary monetary policy to support the dollar.
B) Government of Canada must reduce spending and increase taxes.
C) Bank of Canada must sell U.S.dollars.
D) Bank of Canada must buy U.S.dollars.
E) Federal Reserve System in the United States is required to increase the number U.S.dollars circulating in Canada.