A closed economy can be described by the long-run classical model:

Y = 12K1/3L2/3

C = 7600 + 0.8(Y - T) - 800r

I(r) = 4000 - 200r

Note: r is measured in percentage points (i.e., if r = 5, then r = 5%). Keep your answer to2 decimal placesif needed.

In this economy, there are two productive factors, K and L and both factor inputs are fully employed. The stock of capital and the supply oflabourare equal to 8000 and 3375 respectively. Initially, government spends 12% of long-run output on final goods and services, and it runs a budget deficit of 380.

Suppose data indicates that future sales will be higher than expected. To prepare for higher than expected future sales, firms increase their investmentviaautonomous investment rising by 5%.

Explain, in words only, why autonomous investment increases.