Assume the cost of borrowing in financial markets is simply determined by RBA's cash rate. Then, a financial shock leads to a wedge between the cash rate and the rate at which firms borrow. That is, R = RRBA + f Where Rt is the real interest rate faced by firms, RRBA is the real cash rate and f is the risk premium shock. Assume that the RBA uses a simple monetary policy rule: RRBAT = m( - ) 1. Assuming that this shock is temporary and only lasts for one period, explain using an AD/AS diagram how the RBA can guide the economy back to potential output. 2. Suppose that in part (1) the RBA hits the zero lower bound on nominal interest rates. Explain in words, the implication of the zero lower bound on the ability of the RBA to stabilize output and inflation, and what would happen to short-run output and inflation in our model.