At the beginning of the year, your wealth is $10,000. During the year, you have an income of
$80,000 and you spend $90,000 on consumption. You pay no taxes. Your wealth at the end of the year is
A) $20,000.00.
B) $90,000.00.
C) $100,000.00.
D) $0.

Question

Quizplus · Accepted Answer

At the beginning of the year, your wealth is $10,000. During the year, you earn $80,000 and spend $90,000 on consumption, meaning that you have a negative savings rate of $10,000 ($80,000 - $90,000 = -$10,000). With no taxes, your wealth at the end of the year is simply equal to your initial wealth plus any savings or losses, which in this case is $10,000 (initial wealth) minus $10,000 (savings) for a total ending wealth of $0. Therefore, the best choice is D.

At the Beginning of the Year, Your Wealth Is $10,000