Exogenous Investment in the Simplified Multiplier Model

In a simplified economic model, firms' planned spending on new equipment and buildings is $200 billion, and spending on new residential construction is $50 billion. If the total current output of the economy increases from $1,000 billion to $1,200 billion, what will be the new level of total planned investment?

Evaluating an Economic Prediction

In a simplified macroeconomic model without a government, a significant increase in the economy's total output will directly cause a proportional increase in planned investment spending.

Relationship Between Investment and Output in a Simple Model