Individuals who have restricted access to credit markets:
A)cannot maximize their lifetime utility.
B)save less.
C)must rely on transitory income.
D)are subject to borrowing constraints.
E)can engage in perfect consumption smoothing.

Question

Quizplus · Accepted Answer

Individuals who have restricted access to credit markets are subject to borrowing constraints, which means they are not able to borrow as much as they would like. This can limit their ability to purchase goods and invest in their future, ultimately preventing them from maximizing their lifetime utility. Additionally, these individuals may have to rely on transitory income and may save less since they cannot borrow to smooth consumption over time. However, perfect consumption smoothing is not possible in this situation due to the borrowing constraint.

Individuals Who Have Restricted Access to Credit Markets