Question

According to the Fisher model, why would a person who is rich today and poor tomorrow prefer having a financial market over not having one? State all (relevant) necessary assumptions you make for your argument.

Answer 1

Irving Fisher was one of the greatest Mathematical economists.Fisher's theory of interest holds an important place in the field of Economics.He said interest "an index of a community preference for a dollar of present income over a money of future income."He also labelled his theory of interest - "the impatience and opportunity theory". According to people save out from their current income and then invest in the future using their savings for further expansion of their businesses.A person who is rich and become poor in future ,prefer having financial market because he would invest in stocks, trading in stocks that will give him the opportunity for potential profit in future.Also rich person is anyways used to of trading and investment so when he becomes poor , the habit still does not go and he prefers having financial portfolio so that it would help him in future in earning profits and that would help him to become rich again.