In Irving Fisher's two-period model, consumption for a consumer with a binding borrowing constraint equals an amount that is:
A) equal to current income.
B) greater than current income.
C) equal to future income.
D) greater than future income.

Question

Quizplus · Accepted Answer

With a binding borrowing constraint, the consumer cannot borrow against future income, so their consumption is limited to their current income.

In Irving Fisher's Two-Period Model, Consumption for a Consumer with a Binding