When incomes are larger than expenses, there is a budget surplus than can be saved. This surplus of funds can be used in the financial markets because liquidity has value. You can lend that liquidity to someone who wants it more than you do at the moment and is willing to pay for it. The price than you can get for your money has to do with: Question 3 options: 

the time that you will allow your funds to be loaned the longer time you loan them, the more return you want.

supply and demand of excess funds. the risk involved in loaning your money. 

The more the risk, the more return you want. 

opportunity costs because all decisions have opportunity costs. 

all of the above

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