Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore , and the number of foreign products purchased by domestic consumers and firms (imports) will . Net exports will therefore , causing the quantity of domestic output demanded to . This phenomenon is known as the effect.

Engberg company installs lawn sod in home yards. the company’s most recent monthly contribution format income statement follows: amount percent of sales sales $ 80,000 100% variable expenses 32,000 40% contribution margin 48,000 60% fixed expenses 38,000 net operating income $ 10,000 required: 1. compute the company’s degree of operating leverage. (round your answer to 1 decimal place.) 2. using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. (do not round intermediate calculations.) 3. construct a new contribution format income statement for the company assuming a 5% increase in sales.