economics

Suppose the economy is operating at the zero lower bound for the nominal policy rate, the economy is operating at potential output in period t, but there is a large government budget deficit. A newly elected government vows to cut spending and reduce the deficit in subsequent periods. Use an IS-MP-PC diagram to answer the following questions:
a. What is the effect of the policy on output in period t+1
b. What is the effect of the policy on inflation in period t+1
c. Discuss how to get out of liquidity in such a scenario
d. Discuss how fiscal consolidation will be difficult in such an environment