Suppose That Canada Decides to Peg Its Dollar ($C, or the Loonie)

Multiple Choice

Suppose that Canada decides to peg its dollar ($C, or the loonie) to the U.S. dollar at an exchange rate of $C1 = $US1. What is likely to happen to U.S. GDP following the leftward shift of its IS curve?

A) It will rise.
B) It will fall.
C) It will not change.
D) It will rise dramatically.