Refer to the diagram below. The equilibrium condition for a private closed economy is I_g = S.

Question

Quizplus · Accepted Answer

The equilibrium condition for a private closed economy is given by the IS curve intersecting the 45-degree line at point U1 and the nominal interest rate being equal to r1. At this point, the goods market is in equilibrium as production is equal to demand, and the money market is also in equilibrium as the demand for money is equal to the supply of money. This condition can be represented as I_g = S.

Refer to the Diagram Below