Derive the IS equation for this model.Derive the AD equation for this model.Suppose f permanently increases due to a major financial disruption (like widespread bank failure). In the short-run, what happens to equilibrium inflation? O Increases O Decreases O No change(continued) Suppose f permanently increases due to a major financial disruption (like widespread bank failure). In the short-run, what happens to equilibrium output? O Increases O Decreases O No change(continued) Suppose f permanently increases due to a major financial disruption (like widespread bank failure). In the short-run, what happens to equilibrium consumption? O Increases O Decreases O No change(continued) Suppose f permanently increases due to a major financial disruption (like widespread bank failure). In the short-run, what happens to the equilibrium real interest rate? O Increases O Decreases O No change(continued) Suppose f permanently increases due to a major financial disruption (like widespread bank failure). In the short-run, what happens to equilibrium investment? O Increases O Decreases O No change(continued) Suppose f permanently increases due to a major financial disruption (like widespread bank failure). If the central bank wanted to offset the effect of the shock to f, should it increase or decrease the exogenous component of monetary policy r? O Increase O DecreaseTypically private borrowers have to pay higher interest rates on loans than the government because private borrowers are more likely to default on their loans. Suppose that the demand for investment is given by: I = I-d . (r+f) where f denotes a risk premium that private borrowers have to pay on loans. We will treat f as exogenous and will interpret an increase in f as a negative shock to the financial system. The rest of the model is unchanged. The remaining components of demand are: C = C + mpc . (Y - T) Y = C+I+G r = F t A . T And the short-run aggregate supply equation is: 7 = TTty. ( Y - Y) +p