If Robert was earning $10,000 and now earns $11,500,then
A) Robert's real income must have risen.
B) Robert's real wage has increased,but we can't tell about his nominal wage.
C) Robert could suffer from money illusion if prices increase by 15 percent or more.
D) Robert could experience menu costs if the items on the "value menu" increase in price.
E) Robert will be confused about relative price increases and inflation.

Question

Quizplus · Accepted Answer

If prices increase by 15% or more, Robert's purchasing power may not have increased despite the nominal wage increase, leading to money illusion.

If Robert Was Earning $10,000 and Now Earns $11,500,then