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.
To understand why the demand for credit is higher in Area Y and the supply of liquidity to provide credit is higher in Area Y than in Area O, we need to consider the characteristics of each area.
Area O is described as having more savers than spenders. This means that in Area O, people have typically accumulated more wealth and have a tendency to make conservative investments. These investments often include fixed income instruments like bank deposits and bonds. As a result, the individuals in Area O are more likely to be lenders of money rather than borrowers. They have surplus funds and are willing to lend them out to earn interest or returns on their investments.
On the other hand, in Area Y, people have a higher desire to borrow money. This is driven by the need to buy homes, start businesses, and even consume at a greater rate than they can afford. People in Area Y are more inclined to take on debt to fund their various financial needs and aspirations.
As a consequence, in Area Y, there is a higher demand for credit. These individuals require financial resources to fulfill their borrowing needs and support their goals. The demand for credit can manifest in the form of loans from banks or other financial institutions.
Additionally, in Area Y, there is a higher supply of liquidity to provide credit. This means that there are more sources of funds available for lending in this area. This could be due to a combination of factors such as higher bank deposits, more investors willing to provide funding, or a larger number of financial institutions operating in the area.
In summary, the differences in the financial behaviors of people in Area O and Area Y contribute to the higher demand for credit in Area Y and the higher supply of liquidity to meet that demand. People in Area O tend to be lenders with surplus funds, while people in Area Y are more likely to be borrowers seeking financial resources to pursue their goals and aspirations.