Figure 7 reports the qualitative behavior of the lending interest rate as implied by our modelwhen a negative shock hits the economy. We consider two policy regimes. First, the policy-makerhas just one instrument to address both frictions (Panel a). Second, the policy-maker has two sep-arate instruments to address macroeconomic and financial friction (Panel b). Notice that eachpanel of Figure 7 reports the behavior of two interest rates. The solid line is the lending rate thatwould prevail when there is no interest rate stickiness and no policy action is undertaken (i.e.,in the decentralized economy when interest rates are fully flexible) and will serve as a bench-mark. The dashed line is the lending interest rate that would prevail when interest rate stickinessis present under the two policy regimes analyzed.