Refer to the diagram. The initial demand for and supply of pesos are shown by D 1 and S 1 . Suppose the United States reduces its imports of Mexican goods, shifting its demand for pesos from D 1 to D 2 . Under a system of freely floating exchange rates:

A.  gold would flow from Mexico to the United States.

B.  the peso price of dollars would rise from B pesos equals $1 to A pesos equals $1.

C.  a problem of rationing a shortage of pesos would arise in the United States.

D.  the dollar price of pesos would increase to C dollars equals 1 peso.

B.  the peso price of dollars would rise from B pesos equals $1 to A pesos equals $1.