Financial frictions LOADING... are not a problem for an economy, since they do not affect the safe policy rate, which is controlled by the central bank." Part 2 Is the above statement true or false? True False Part 3 Assuming that policy interest rates are unchanged, which of the following statements is true of the effect of financial frictions? A. An increase in financial frictions leads to an increase in inventories, thereby increasing aggregate output. B. An increase in financial frictions leads to a decrease in planned spending, thereby decreasing aggregate output. C. An increase in financial frictions leads to a decrease in actual demand, thereby decreasing aggregate output