Money illusion is the:
A)increase in the amount of money that it takes to purchase goods and services when prices rise.
B)inability to understand that prices always rise.
C)tendency to focus on nominal values instead of inflation-adjusted values.
D)illusion that one's earnings this year are higher than they were last year.

Question

Quizplus · Accepted Answer

Money illusion is the tendency to focus on nominal values (i.e. values that are not adjusted for inflation) instead of adjusting for changes in the buying power of money. This can lead to misunderstandings and errors in economic decisions.

Money Illusion Is The