In Irving Fisher's two-period consumption model, if Y₁ = 15,000, Y₂ = 20,000, the interest rate r is 0.50 (50 percent), and there is a constraint on borrowing that is binding, then C₂ equals: A) 20,000. B) 22,500. C) 35,000. D) 42,500.

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When borrowing is constrained, the consumer cannot borrow against future income, so they can only consume their income in each period. Therefore, C2 equals Y2, which is 20,000.

In Irving Fisher's Two-Period Consumption Model, If Y1 = 15,000

In Irving Fisher's Two-Period Consumption Model, If Y₁ = 15,000