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May 26, 2015

Homework Help: financail Management

Posted by Anonymous on Saturday, May 21, 2011 at 11:10pm.

In Area O, there will be more savers than spenders. Old people have usually accumulated more wealth and usually tend to have it in more conservative investments (i.e. fixed income instruments), whether they be bank deposits, bonds, etc.

In Area Y, people will have more desire to borrow, in order to buy homes, start businesses and (unfortunately) consume at a greater rate than they can afford.

Thus, in Area O, there will be more net lenders of money and in Area Y, there will be more net borrowers of money.

The demand for credit will be higher in Area Y than in Area O and the supply of liquidity to provide credit will be higher in Area Y than in Area O.

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