One of the functions of financial intermediaries is to address the asymmetric information problems of adverse selection and moral hazard. These issues are one type of financial frictions that add to the real interest rate. Denote these financial frictions by f, the extra cost of funding due to potential issues with borrowers creditworthiness in light of asymmetric information. The real cost of funding is then given by ri=r+f Thus if investment (purchase of new physical capital goods), a component of aggregate demand, depends inversely on the real cost of funding ri, an increase in financial frictions will affect investment. Please answer the following: In the aftermath of the 2007 Financial Crisis, investment fell despite a substantial decrease in interest rates. A possible explanation is that asymmetries of information . This implies that the cost of funding as f