Refer to the Diagram $$D _ { 1 } \text { and } S _ { 1\cdot }$$

question 67

Multiple Choice

Refer to the diagram. The initial demand for and supply of pesos are shown by $$D _ { 1 } \text { and } S _ { 1\cdot }$$ . Suppose
The United States reduces its imports of Mexican goods, shifting its demand for pesos from
$$D _ { 1 } \text { to } D _ { 2\cdot }$$ If the United States and Mexico were both on the international gold standard,

• A) gold would ?ow from Mexico to the United States.
• B) the exchange rate would rise from B dollars equals 1 peso to C dollars equals 1 peso.
• C) gold would ?ow from the United States to Mexico.
• D) the exchange rate would fall from B dollars equals 1 peso to A dollars equals 1 peso.

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