The price of a dozen eggs rises from $3 to $4. 70. In response to this price change, quantity supplied increases from 100,000 dozen eggs to 127,000 dozen eggs. What is the approximate price elasticity of supply for eggs?.

Answers

Answer 1

The approximate price elasticity of supply for eggs is 0.48.

Calculating,

Price elasticity of supply = [tex]\frac{Percentage Change In Quantity Supplied}{Percentage Change In Price }[/tex]

Percentage change in quantity supplied= [tex]\frac{127000-100000}{100000}[/tex] × [tex]100[/tex] = 27%

Percentage change in price= [tex]\frac{4.70-3}{3}[/tex]×[tex]100[/tex]  = 56.67%

Price elasticity of supply of eggs = [tex]\frac{Percentage Change In Quantity Supplied}{Percentage Change In Price }[/tex]

= [tex]\frac{27}{56.67}[/tex]

= 0.4764 or 0.48

The relationship between the percentage change in a product's quantity demanded and the percentage change in price is known as price elasticity of demand. It helps economists comprehend how supply and demand shift in response to changes in a product's price. The elasticity of supply and demand to changes in price is discussed in the elasticity theory. Elasticity in economics is used to analyze how shifts in consumer spending patterns or producer prices affect shifts in product demand and supply. A good or service's responsiveness to supply after a change in its market price is measured by its price elasticity of supply. When a good's price increases, its supply will also rise. A good's supply will fall when its price rises, on the other hand.

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Related Questions

Barbara's bangles outsells other jewelry designers in her town because it produces jewelry more efficiently and effectively than its competitors. this demonstrates the company's?

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Barbara's bangles outsell other jewelry designers in her town because it produces jewelry more efficiently and effectively than its competitors.

this demonstrates the company's competitive advantage

This is further explained below.

What is a competitive advantage?

Generally, In the world of business, a competitive advantage is the quality that enables a company to achieve a higher level of success than its rivals.

In conclusion, The reason why Barbara's bangles sell more than those of other jewelry designers in her area is that the company creates jewelry in a more efficient and effective manner than its rivals.

This exemplifies the company's strategic advantage in the marketplace.

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suppose that a society begins at a point inside its production possibilities frontier (ppf) and then ends up at a point on the same ppf. which of the following could have caused such a change? a. the society started out using all its resources, but then allowed some of its resources to become unemployed. b. the society developed an improvement in technology. c. the society had some unemployed resources to begin with, but then started using all its resources. d. the society experienced an increase in the quantity of resources available.

Answers

Suppose a society begins at a point inside its PPF and ends up at a point on the same PPF. Such a change would be caused by the society which had some unemployed resources to begin with, but then started using all of its resources.

The Production Possibilities Frontier (PPF) tends to show all the different combinations of output of two goods which can be produced while using available and unemployed resources and technology.

Suppose if there is increase in the availability of the resources in the economy then automatically the overall output in the economy will increase which will shift the PPF to the right.

Hence, option C is correct.

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you want to have $30,000 saved 5 years from now to buy a house. how much less do you have to deposit today to reach this goal if you can earn 3.5 percent rather than 2.5 percent on your savings? today's deposit is the only deposit you will make to this savings account.

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Today's deposit is the only deposit you will make to this savings account of $ 1,256.43 with 2.5 percent on your saving.

A savings account is what?

A savings account is one held with a retail bank. Common traits include a limited amount of withdrawals permitted, the absence of a check or attached debit card facility, the limited availability of transfer options, and the inability to get overdrawn.

A savings account, which allows you to deposit money and often yields a reasonable rate of interest, is a crucial type of financial tool.

These government-insured accounts offer a secure place to store your money while generating interest, up to $250,000 per account owner.

A savings account is an equity deposit account held with a financial institution like a bank.

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a cosmetics manufacturer’s marketing department has developed a linear trend equation that can be used to predict annual sales of its popular hand

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The marketing division of a cosmetics firm has created a linear trend equation that may be used to forecast yearly sales of its well-known Hand & Foot Cream. Ft = Annual Sales (000 bottles), and t = 0 corresponds to 1990 a. Ft = 80 + 15t

A trend equation is an equation created to determine the anticipated level of output based on the sales' historical trend as determined by the data that is now available.

The marketing division of a cosmetics business has created a linear trend equation that may be used to forecast yearly sales of its well-known Hand & Foot Cream.

Ft =80+14t

Where

Ft Annual Sales Forecast (bottles)

1990 is represented by t= 0.

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An antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm is called ______.

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An antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm is called the Poison pill/shareholders' right plan.

What are Poison pills?

The board of directors of a firm might adopt a shareholder rights plan, also referred to as a "poison pill," as a form of a defensive strategy to thwart a takeover.

In the area of mergers and acquisitions, shareholder rights plans were created in the early 1980s as a means of preventing takeover bids by eliminating a shareholder's ability to directly bargain the price of the sale of shares.

Usually, if one shareholder purchases a specific proportion or more of the company's shares, a scheme like this allows owners to purchase additional shares at a discount. The plan might be activated, for example, if one shareholder purchases 20% of the company's shares. At that moment, all shareholders (except the shareholder who owns 20%) will be eligible to purchase a fresh issue of shares at a discount. The bidder's stake would be significantly diluted if all other shareholders were able to purchase additional shares at a discount, which would result in a significant increase in the bid's price. Knowing that such a scheme might be implemented, the board would need to be convinced to cancel the plan in order for the bidder to be dissuaded from taking over the company without its consent.

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which statement is not correct about the business-society interdependence? multiple choice business is a part of society. business is separated from the rest of society by clear boundaries. business activities impact other activities in society. actions by governments rarely affect business.

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Business is a part of society is the correct option

Corporations can implement CSR as a business practice in a variety of ways. As a business practice, corporate social responsibility entails directing funds to organizations or individuals in need. Some corporations donate a portion of their profits to programs that feed the hungry, while others donate to organizations that clean up the environment.

Businesses are also expected to maintain a certain level of accountability in the way they conduct business. A company can be considered ethically irresponsible if it knowingly causes environmental harm or if its business practices cause employees to be treated unfairly.

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Registration and licensure are similar in scope except that a registered professional generally has a broader range of professional practice. True or false

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Registration and licensure are similar in scope except that a registered professional generally has a broader range of professional practice. False

Definitions and instances of registration

Registration is the act of signing up, or the quantity of people joining up. A commitment to serve as a camp counselor is an illustration of a registration. The number of individuals in a group for whom a restaurant has been asked to make reservations is an example of a registration.

The goal of document registration is to notify all parties that a specific property document has been executed. Another crucial role played by registration offices is record keeping, and for all intents and purposes, these records are permanent.

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when the government imposes a limit on sales of a good or service by a quota, it usually issues a license that gives the owner the right to sell a given quantity of the good. the market price of the license is equal to: a the wedge that represents the difference between the demand price and the supply price. b the demand price of the good. c the per-unit quota rent multiplied by the quota limit. d the market equilibrium price. e the per-unit quota rent.

Answers

When the government places a quota on the amount of an item or service that may be sold, it typically offers a license to the business owner allowing them to sell a certain amount of the good. The license's market price is equal to the good's demand price.

What do you understand by market equilibrium?

Market equilibrium is a condition in which a good's supply and demand are both equal. In other words, there is no surplus supply or demand in a market equilibrium condition.

A market is considered to have attained equilibrium when there is an equal balance between supply and demand for a good or service. Consistent agent conduct, the lack of incentives for agents to change their behavior, and the dynamic nature of equilibrium outcomes are three features of an equilibrium market.

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What makes u.s. ports and navigable waterways such important assets? what is considered the most significant threat to the maritime transportation system?

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There has been a national interest in reliable maritime transportation ever since the United States was founded.

The national infrastructure that supports domestic and international trade, business, and leisure includes ports and rivers. The federal government has taken on responsibility for the creation, upkeep, and secure operation of shipping channels in recognition of this crucial purpose. Federal interest for environmental protection is relatively recent but no less significant.

There is a national interest in ensuring that all vessels adhere to the minimum international standards for "rules of the road," language, radio frequencies, and other elements of maritime protocol because ports and waterways are also a part of a global transportation system that must accommodate diverse fleets.

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At 6.8 percent interest, how long does it take to double your money? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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14.71 years when simple interest used annually.

10.59 years when compounded Interest used annually.

We can calculate the doubling time by either using simple interest rate annually or compounded interest rate annually.

First, if we use simple interest rate annually than according to the formula it can be derived simply by dividing the periodic rate by 1.

Doubling Time without compounding = 1/rate.

                                                              = 1/6.8

                                                              = 14.71 years when simple interest    

                                                                 used annually.

In case of compounded interest rate annually.

Doubling time through Rule of 72 is by dividing 72 by the interest rate.

                                                              = 72/6.8

10.59 years when compounded annually.

However, if we use normal excel calculations then

For simple interest time required to double the money let say $100.

A      = PRT+P

200  =100×6.8×T+100

100   =6.8T

T       =14.71 years

For compounded interest

A       = P[tex](1+r)^n[/tex]

200   = 100[tex](1+6.8)^n[/tex]

2        =[tex]1.068^n[/tex]

n        = 10.54 years

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moody corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. at the beginning of the year, the company made the following estimates:

Answers

$9.14 per machine hour

Explanation:

Fixed predetermine overhead rate:

= Fixed manufacturing overhead cost ÷ Machine hours required to support estimated production

= 660,000 ÷ 152,000

= 4.34 per machine hour

Variable predetermine overhead rate = $ 4.80 per machine hour

Total predetermine overhead rate:

= Fixed predetermine overhead rate + Variable predetermine overhead rate

= ($4.34 + $ 4.80)

= $9.14 per machine hour

What is Job Order Costing?
Labor costing is a costing method  used to determine the cost of manufacturing each product. This costing method is typically used when a manufacturer manufactures a variety of products that differ from each other and needs to calculate the cost of doing a single job. Job costing includes  direct labor, direct materials, and manufacturing overhead for that particular job.
To determine the profitability of a job
Job cost helps determine if a job is profitable. This helps the company estimate the value of the materials, labor, and overheads expended to perform that particular job. Efficient labor costing can help companies  create competitive low enough quotes, yet still be profitable for your business.

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Incomplete Question

according to mintzberg, a manager who is creating her team’s budget for next year is operating in which category of roles?

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According to Mintzberg, a manager who is creating her team’s budget for next year is operating in Decision making roles

   Managers are in charge of making decisions, and they can do this in a variety of ways depending on the level. The way a leader leads matters when making decisions. The Mintzberg Managerial Roles listed below are those that involve decision making roles.

1. Entrepreneur

The manager develops and launches initiatives and adjustments as an entrepreneur would.

2.disruption handler

The manager always reacts right away to unforeseen events and operational failures in his managerial function as disturbance handler. He seeks practical answers.

3.resource manager

The manager supervises and approves the use of organizational resources in his capacity as resource allocator.

4. Negotiator

As a negotiator, the manager takes part in discussions with other businesses and people, representing the organization's interests.

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If an insurer requires that an applicant or insured undergo a physical examination in order to obtain or continue coverage, who must pay the cost of such examination?

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The one who must pay the cost of such examination is insurer.

They are the company that develops the insurance policy and sets the terms of the agreement. The terms underwriter and insurer are sometimes used synonymously. It is the responsibility of insurance companies to fulfill the commitment made by an insurance policy to reimburse the policyholder for a loss. Frequently, you buy your insurance coverage directly from an insurer.

However, a lot of people use brokers to purchase their insurance. A broker is not an insurer. On behalf of insurers, brokers offer insurance. When you purchase insurance through a broker, the insurer is responsible for issuing your policy and managing any claims you may have.

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Forensic anthropologists take into account a person’s age when calculating stature. Why do you think most forensic anthropology textbooks also describe adjustments to height calculations for persons over 45?.

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Most Forensic anthropology textbooks also describe adjustments to height calculations for persons over 45 because as people grow older (45 and above), people become shorter.

Physical anthropology is the study of human remains, and forensic anthropology is the application of skeletal analysis and archaeological methods to criminal case investigations. Forensic anthropologists are relied upon to collect data from the bones and their retrieval environment to identify who died, how they died, and when they died when human remains or a presumed burial are discovered. The study of hard tissues like bones is a specialty of forensic anthropologists. Due to their background in archaeology, they are also skilled at carefully preserving the evidence and uncovering buried relics.

Although physical anthropology focuses on the biological underpinnings of human behaviour as well as human development, variation, and adaptation, forensic anthropology may benefit from many of its excavation and reconstruction methods.

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which action is an example of bribery, a tactic used by companies to stop unions from forming? a company hires workers known as "scabs" to replace striking workers. company management secretly pays a worker to tell them which coworkers have discussed forming or joining a union.

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Correct Answer is B) Management secretly pays workers to let them know which colleagues have discussed forming a union.

One example of a bribe that companies use to discourage union formation is for management to covertly pay workers to tell them which colleagues are talking about union formation. A bribe is giving something in return for favor or  influence that you would not have otherwise received. Thus, an example of bribery is when a company secretly pays an employee to obtain information. For example, as a "accuser". In this way, management is well informed about the opinions and decisions of  other employees and can anticipate their reactions.

What is Striking Workers?

A strike, also known as a labor strike or simply a strike, is a stoppage of work caused by workers refusing to work an masse. Strikes are usually  in response to employee grievances. Strikes became common during the Industrial Revolution when mass labor  in factories and mines became important. As strikes became a more common practice, governments were often pressured (by private companies or union members) to take action. Where government interventions occur, they are rarely neutral or consensual. Early strikes, often viewed as illegal conspiracies or anticompetitive antitrust practices, faced massive legal repression by state police, federal forces, and federal courts. Many Western countries legalized strikes under certain conditions in the late 19th and early 20th centuries.

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Why are shortages or surpluses more likely with preset prices than fluctuating prices?

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Preset pricing makes an effort to forecast the level of demand that will result in an equilibrium quantity rather than reacting to demand situations.

A state of balance is only useful temporarily. The market won't be in equilibrium if supply or demand changes until the price adjust to the new equilibrium point. Because the market price cannot adapt in reaction to changes in supply and demand, preset prices are likely to generate shortages and surpluses. On the other hand, if pricing was flexible, there would be a lower likelihood of shortages or surpluses since the price could be changed to the new equilibrium price anytime supply or demand changes. Sometimes the market is not in equilibrium, meaning that the amount supplied and the amount requested are not equal. Either there is an excess of supply or demand at this time. When there is an excess of supply that is when the amount supplied exceeds the amount demanded a market surplus results.

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in each of the following scenarios, identify whether the supply curve or demand curve shifts in the loanable funds market, and in which direction. there is a widespread fear that the social security retirement system will collapse. as a result, people begin to assume that they will need to pay their own way in retirement. smartwork

Answers

The result of the following situation will be that the People begin to save as a result, which increases the supply of loanable funds and moves the number of loanable funds available to the right.

What is a market plan?

A marketing plan is a strategy or alteration that an organization is planning to make to its operations or behavior. It can have to do with the product or how they are marketing it.

As there is a change in the demand curve and the supply curve then the will be investing the money as the people are not putting their amount in the retirement fund as that is so the people will be more interested in the loan fund which demand will increase.

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A(n) _____ is a collection of people who work together and coordinate their actions to achieve a wide variety of goals.

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  The organization is a collection of people who work together and coordinate their actions to achieve a wide variety of goals.

What is a measure of an organizational goal and the degree to which an organization achieves the goal?

An organization could be a bunch of individuals who work together, like a neighbourhood association, a charity, a union, or a corporation. it will be able utilize the word organization to refer to gather or business, or to the act of shaping or setting up  goal.

Organizational effectiveness can be characterized as the degree to which an organization achieves its objectives. how effective an organization is in achieving its intended outcomes and results.

 

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ace electronics paid $4,000 of the $5,000 its employees had earned during the period. ace electronics should report wages expense of $5,000 on the income statement and wages payable of on the balance sheet prepared in accordance with generally accepted accounting principles.

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The correct answer is $5,000;$1,000;$4,000

Cash, the sole fully liquid asset, is shown last among the assets in the order of permanence, with fixed assets appearing before current assets. The revenue recognition principle and the matching principle are two ideas, or principles, that the accrual method of accounting uses.

Assets equal Liabilities plus Owners' or Stockholders' Equity in the accounting equation. Three of the five so-called "accounting elements"—assets, liabilities, and equity—are present in this equation.

One of the three key financial statements that summarises a company's financial performance for a given accounting period is the income statement, together with the balance sheet and the statement of cash flows.

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a country reported nominal gdp of $115 billion in 2010 and $125 billion in 2009. it also reported a gdp deflator of 85 in 2010 and 100 in 2009. between 2009 and 2010,

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A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. it also reported a GDP deflator of 85 in 2010 and 100 in 2009. between 2009 and 2010,  real output rose and the price level fell.

Nominal GDP is an assessment of financial products in a financial system that includes contemporary charges in its calculation. In different phrases, it would not strip out inflation or the tempo of growing costs, which could inflate the growth figure. Nominal GDP measures output and the usage of contemporary costs, however actual GDP measures output using constant prices.

Nominal GDP is the inflation-adjusted GDP of a rustic. The Nominal GDP of a country is expressed in phrases of modern-day year fees of products and offerings. The real GDP of a country is expressed in terms of base year costs or steady fees for goods and offerings. It is simple to calculate Nominal GDP.

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Bolt enterprises receives $100,000 cash from its customers on account. bolt uses the cash to pay off $100,000 on a bank loan, the net result is that?

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Bolt enterprises receive $100,000 cash from its customers on account. bolt uses the cash to pay off $100,000 on a bank loan, the net result is that assets would decrease by $100,000 and liabilities would decrease by $100,000.

The journal entry to document the purchase of supplies on account/on credit score increases the asset, resources debit, and increases the liability, bills Payable credit. The magazine's access to report the acquisition of components for coins will increase one asset, resources debit and decrease every other asset, cash credit score.

A noncurrent asset is an extended-time period investment that your business enterprise makes that is not probable to become coins inside an accounting yr or does not without difficulty convert to cash. constant assets typically observe to property, plant, and system. accounts receivable, or AR, collections is the method of improving money owed to an employer. step one is to become aware of the debtor and then find a manner to touch them and ask for payment.

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Firms have routinely turned down work to individuals with little education or vocational training and a long history of unemployment. these people are known as?

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Firms have routinely turned down work to individuals with little education or vocational training and a long history of unemployment. these people are known as Hardcore unemployed.

Vocational training is training to prepare to work as an engineer or to begin working as a craftsman or craftsman. In vocational training, students complete specialized courses as well as practical training through internships and fieldwork. For example, dental hygienists acquire their skills through practice hours, while veterinary technicians complete labs and internships at veterinary clinics.

Occupation may be working outside the professional field of activity. For example, merchants work as godparents for young people or as Sunday school teachers. Teachers may have callings as mentors or worship leaders.

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A document that is used to chronologically record a business's debit and credit transactions is called a:______.

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A document that is used to chronologically record a business's debit and credit transactions are called a general journal.

The general Ledger is a monetary report of all transactions and balances for a given entity. it's miles a chief aspect of a corporation's accounting system and affords a first and maximum critical reason of journalizing transactions is to maintain your commercial enterprise' budget accurate and properly organized. The magazine records these records chronologically, through debits and credit, which makes the information clear to evaluate and accounting mistakes smooth to spot.

Chronological precis of all monetary pastimes. Chronological is a sorting approach where items are organized by using their incidence in time. In most instances, these objects a separated through specific dates or times of day inside a date. The photograph is an instance of files indexed in chronological order in the Microsoft home windows File Explorer.

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If the fed wants to raise real gdp growth by raising money supply growth, which condition will make monetary policy more effective in raising real gdp growth?

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The fed wants to raise real GDP growth by raising money supply growth,  condition will make monetary policy more effective in raising real GDP growth is Prices continue to remain vert sticky.

When prices are sticky increase in aggregate demand is larger and monetary policy is more effective.

 What is GDP?

A monetary indicator of the marketplace worth of all of the completed items and offerings produced in a state over a given time period is referred to as the gross domestic product (GDP). This measurement is often modified before it may be trusted as a hallmark due to how complicated and subjective it's miles.To evaluate residing standards among international locations, the use of a foundation of GDP in step with capita at purchasing electricity parity (PPP) may be more beneficial, while nominal GDP is greater beneficial for evaluating country wide economies on the global marketplace. GDP (nominal) in step with capita does now not, however, mirror variations inside the cost of living and the inflation fees of the countries.The contribution of each enterprise or sector to the overall GDP can also be quantified. The consistent with capita GDP of a vicinity is calculated because the GDP divided by way of the entire populace (additionally known as the imply standard of residing).several countrywide and international financial companies hold GDP definitions. GDP is defined as "an mixture degree of manufacturing same to the sum of the gross values delivered of all resident and institutional gadgets engaged in production and offerings (plus any taxes, and minus any subsidies on merchandise not included inside the price in their outputs)" by using the employer for monetary Co-operation and development (OECD).

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Businesses earn profits by converting financial, physical, and labor resources into goods and services that satisfy consumer demands. true or false

Answers

The answer is false. Options traders can benefit by either buying or writing options. Options offer for possible profit during both tumultuous moments, independent of market direction. Because options can be exchanged in anticipation of market appreciation or depreciation, this is feasible.

There is an options strategy that can profit from price movements in assets such as stocks, currencies, and commodities. Individuals can earn from any market state, from bull to bear to sideways, depending on the options strategy they use. When you buy an option, your upside potential is limitless, and your maximum loss is the cost of the option premium.

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net working capi tal is defined as current liabilities minus current assets. group of answer choices true false

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Net working capital is defined as current liabilities minus current assets.

This statement is False.

What is meant by net working capital?

Working Capital = Current Assets - Current Liabilities

Current Assets

Current assets are the economic benefits that the company expects to receive within the next 12 months. The company has the right to receive the financial benefit, and calculating working capital.

Current Liabilities

Current liabilities are simply all debts a company owes or will owe within the next twelve months.

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what is the cost of goods sold for may? what is the total value of the finished goods inventory at the end of may? what is the total value of the work in process inventory at the end of may?

Answers

Cost of goods sold is the term used to describe the direct expenses incurred by a company in manufacturing the commodities it sells (COGS). This total also includes the price of the materials and labor that were used directly to create the item. It excludes indirect costs like those incurred in connection with the sales team and distribution.

The phrase "cost of sales" is another name for "cost of goods sold."

All costs and expenses directly associated with the creation of goods are included in the cost of goods sold (COGS).Indirect expenses like sales and marketing and overhead are not included in COGS.Gross profit and gross margin are determined by deducting COGS from revenues (sales). Lower margins are the result of higher COGS.Depending on the accounting principles employed in the computation, COGS will have a different value.Operating expenses (OPEX) are distinct from COGS since OPEX covers costs that are not directly related to the creation of goods or services.As a company's gross profit is calculated by subtracting COGS from its revenues, COGS is a crucial financial statement statistic. The gross profit is a measure of profitability that assesses how effectively a business manages its workers and resources during the production process.

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what is an example of a slogan?we do the work so you don’t have to.we do the work so you don’t have to.why buy a lesser product for twice the money?why buy a lesser product for twice the money?who doesn’t want to look like a movie star?who doesn’t want to look like a movie star?don’t be the last on your block.

Answers

what is an example of a slogan?we do the work so you don’t have to. Is an example of an slogan.

What is  slogan?

A slogan is "a brief and striking or memorable statement used in advertising," according to the Oxford Languages, which is a very accurate definition of a slogan. These "mottos" are used in marketing efforts to help sum up why your company, brand, product, or service is so fantastic and what makes you different.

Therefore,

what is an example of a slogan?

we do the work so you don’t have to. Is an example of an slogan.

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Companies are greatly expanding the type, nature, and level of data to analyze. what does this behavior indicate?

Answers

Companies are greatly expanding the type, nature, and level of data to analyze the behavior indicate is It illustrates the accelerating pace of people analytics production.

Businesses are significantly increasing the sort nature, and degree of information to investigate. At Nielsen people analytics confirmed the shortage of internal mobility become a difficulty wherein worker retention became worried.

Human analytics is about collecting and analyzing facts about human beings in a staff. it's now and again referred to as HR analytics or team of workers analytics. Human statistics is found in HR structures from other departments that find it irresistible and sales and from outside sources which include profits surveys. In two thousand one, Merck first commenced using human beings' statistics to inform decisions.

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assume a country has an open economy and a flexible exhange rate system. an increase in the country's government budget deficit

Answers

If a country has an open economy and a flexible exchange rate system. An increase in the country's government budget deficit will cause an increase in real interest rate and a decrease in net exports.

In an open economy with flexible exchange rate system, the crowding out mechanism becomes stronger. So here the fiscal expansion causes both a rise in the interest rates as well a fall in the exchange rate. Thus, this leads to the reduction in both domestic expenditure and net exports.

In an open economy, an increase in the country's government budget deficit will thus lead to an increase in real interest rate and which leads to a decrease in net exports.

Hence, a budget deficit increases the level of public sector debt.

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