The country of Leverett is a small open economy that exports high-quality tea. Unfortunately, the world's consumers increase their demand for high-quality coffee instead of tea.

a. What happens in Leverett to saving, investment, net exports, the interest rate, and the exchange rate?

b. The citizens of Leverett like to travel abroad. How will this change in the exchange rate affect them?

c. The fiscal policymakers of Leverett want to adjust taxes to maintain the exchange rate at its previous level. What should they do? what are the overall effects on savings, investment, net exports, and the interest rate?