Refer to the Above Diagram

Multiple Choice

Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates:

A) gold would flow from Mexico to Canada.
B) the peso price of dollars would rise from 1/B pesos equals $1 to, 1/A pesos equals $1.
C) a problem of rationing a shortage of pesos would arise in Canada.
D) the dollar price of pesos would increase to C dollars equals 1 peso.