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

question 27

Multiple Choice

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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Definitions:

Interest Per Year

The annual amount of interest paid on an investment or loan, expressed as a percentage of the principal.

Net Proceeds

The amount of money made on a stock trade after the brokerage fees are paid.

Broker Fee

A flat fee or commission that a stockbroker charges for trade stocks.

Fractional Share

A portion of a single share of a company, allowing investment in smaller amounts than the full share price.