Question: The country of Leverett is a small open economy. Suddenly, a change in world fashions makes the exports of Leverett unpopular.
a. What happens in Leverett to saving, investment, net exports, the interest rate, and
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? If they do this, what arc the overall effects on saving, investment, net exports, and the interest rate?