In terms of its impact on savings:
a. Discuss which are more relevant for China: liquidity constraints or borrowing constraints.
b. Discuss which is more relevant (liquidity or borrowing constraints) for each of these activities:

Question

Quizplus · Accepted Answer

The Answer is a. The absence of a credit culture (borrowing against the future) and the credit rating mechanisms that would allow one to do so suggest that borrowing constraints are more important. Much of China's wealth is held in a highly liquid form, suggesting that liquidity constraints no longer are binding for many citizens.
b. i. Purchase of a product at Carrefour or Walmart. Liquidity Constraint
ii. Use of a debit card. Liquidity Constraint
iii. Use of a credit card. Borrowing Constraint
iv. Loan (mortgage) for the purchase of a new home. Borrowing Constraint
v. Restrictions/penalties on sale of stock/equity holdings before a specified holding period has expired. Liquidity Constraint

In Terms of Its Impact on Savings