Suppose that the economy is in a recession, i.e. Y(bar) = Y,.Assume that the investment function I(r) is not sensitive (responsive) to changes in the real interest rate (r) and the money demand function is very responsive to changes in r.

What does this imply about the slopes of the IS and LM curves?If you were a policy advisor, would you recommend monetary policy or fiscal policy? Why? How would this policy affect r, Y, C, and I?Illustrate and explain.