Suppose that Canada decides to peg its dollar ($C, or the loonie) to the U.S. dollar at an exchange rate of $C1 = $US1. If the U.S. IS curve shifts to the left, will there be pressure for the Canadian dollar to change in value against the U.S. dollar as a result?
A. Yes, the value will appreciate.
B. Yes, the value will depreciate.
C. No, the value will not change in value.
D. Yes, but that pressure will be offset.