The financial friction is the:
A) difference between the federal funds rate and interest rates in financial markets.
B) interest rate used in subprime loans.
C) difference between long-run inflation and the actual rate of inflation.
D) result of adding the inflation rate to the unemployment rate.
E) variance of the risk-free interest rate.

Question

Quizplus · Accepted Answer

The financial friction refers to the difference between the federal funds rate (the interest rate at which banks lend to each other overnight) and other interest rates in financial markets. This difference can hinder the smooth flow of credit and lending in the economy.

The Financial Friction Is The