Answer:
The correct answer is option E.
Step-by-step explanation:
Financial frictions in the process of making transactions, it refers to the stickiness involved in the process of making transactions. It includes the time, money and efforts that are involved in gathering information and making a transaction.
Institutional reforms can help in reducing financial frictions. A decrease in financial frictions will make transactions easier.
It will help in increasing planned investment spending. The financial markets will be able to function more efficiently.
The cost of borrowing for business will decrease, this will increase investment expenditure.
The credit spread or difference between yields from a government bond and some other bond with the same maturity will decrease.