Money illusion is the
A)Use of nominal dollars rather than real dollars to gauge income or wealth.
B)Movement of taxpayers into higher tax brackets as nominal income increases.
C)Focus on real dollars rather than nominal dollars to determine purchasing power.
D)Uncertainty that occurs because of inflation.

Question

Quizplus · Accepted Answer

Money illusion refers to the tendency to focus on nominal dollars rather than real dollars. This means that people often do not take inflation into account when thinking about their income or wealth. They may be happy to receive a nominal pay increase, for example, even if the increase is actually less than inflation, which means that their real income has decreased.

Money Illusion Is the