g The financial friction: Group of answer choices is equal to zero when the economy is in its long-run equilibrium.

Complete Question:

The financial friction:  

O is equal to zero when the economy is in its long-run equilibrium.  

O is negative in Japan.  

O lowers the borrowing rate below the nominal federal funds rate.  

O is equal to the rate of inflation.  

O is lower in uncertain economic situations.

The financial friction:  

O is equal to zero when the economy is in its long-run equilibrium.  

Explanation:

Financial friction is the difficulty that one encounters in financial transactions.  It includes the total time, effort, money, and tax effects of the process of gathering information and concluding a transaction such as the buying of a stock or the borrowing of money.

When an economy is in the long-run equilibrium it naturally implies that aggregate demand equals aggregate supply.  And at this equilibrium, the long-run marginal cost curve is equal to the long-run average cost curve.  There is, therefore, no profit or loss.  Financial friction representing the cost of making a transaction equals zero because the suppliers of economic activities will not make any profit or loss.

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