Individuals who have restricted access to credit markets:
A) cannot maximize their lifetime utilities.
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, limiting their ability to borrow money for investments or other purchases. This can lead to a suboptimal allocation of income and limitations on their ability to maximize their lifetime utilities. They may also have to rely more heavily on their current income and savings, rather than being able to smooth consumption perfectly.

Individuals Who Have Restricted Access to Credit Markets