If you feel you are better off because you receive a 20 percent raise even when the price level also increases by 20 percent, then you are a victim of the
A) real income effect.
B) money income effect.
C) money illusion.
D) real purchasing power effect.

Question

Quizplus · Accepted Answer

The scenario described in the question is an example of money illusion, where the increase in money income is not adjusted for the increase in the price level. In reality, the individual's purchasing power remains the same despite the raise and the increased prices.

If You Feel You Are Better Off Because You Receive