Final answer:
The equilibrium in the Goods market for the given closed economy occurs at a real interest rate of 7%, where the desired savings and investment are equal. This is represented graphically by the intersection of the savings and investment lines at the real interest rate on the x-axis and corresponding levels of savings and investment on the y-axis.
Step-by-step explanation:
To find the equilibrium in the Goods market for a closed economy, we need to set the desired savings (Sd) equal to the desired investment (Id). Given the functions Sd = 100+600r and Id = 170−400r, where r represents the real interest rate, we can find the equilibrium real interest rate by finding the value of r that satisfies both equations simultaneously.
First, we equate the two expressions:
100 + 600r = 170 - 400r
Solving for r gives us:
1000r = 70
r = 0.07 or 7%
This is the equilibrium real interest rate where the desired savings equals the desired investment. To illustrate this on a graph, we draw the desired savings line starting from 100 and sloping upwards, and the desired investment line starting from 170 sloping downwards. The point where the two lines intersect represents the equilibrium, with the x-axis representing the real interest rate (r) and the y-axis representing the levels of savings and investment.