Explain why the AD curve becomes upward sloping at the zero lower bound. Use the fisher equation and a well labelled diagram to explain your answer.

Assume the economy is facing a recessionary output gap in the upward sloping segment of AD curve. What will be the effect on Real GDP and inflation in the long run if the government and the central bank do not intervene. Use a well labelled diagram and explain in words to get full credit.

Assume the economy is facing a recessionary output gap in the upward sloping segment of AD curve. Explain how management of expectations combined with liquidity provisions will affect Real GDP and inflation. Explanation along with graphical representation is required to get full credit.