Refer to the Diagram Below

Multiple Choice

Refer to the diagram below.The initial demand for and supply of pesos are shown by D₁ and S₁.Suppose Canada reduces its imports of Mexican goods, shifting its demand for pesos from D₁ and D₂.If Canada was operating under a system of exchange controls that maintains the exchange rate at E, the Canadian government would:

A) find that, at the controlled exchange rate, pesos would be in surplus.
B) be faced with deteriorating terms of trade.
C) be faced with the problem of rationing BG pesos to Canadian importers who want BF pesos.
D) be faced with the problem of rationing BF pesos to Canadian importers who want BG pesos.