If the government wants to reduce the budget deficit, how can the central bank

keep the economy from going into a recession? Use the closed economy ISLM model to

illustrate graphically the impact of both the fiscal policy reducing the deficit and the monetary

policy, which prevents output from falling. Be sure to label:

i. the axes;

ii. the curves;

iii. the initial equilibrium values;

iv. the direction the curves shift; and

v. the terminal equilibrium values.