If you feel you are better off because you receive a 10 percent raise even when the price level also increases by 10 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

This scenario is an example of money illusion, where individuals focus on the nominal increase in their wages without considering the inflation rate, leading them to believe they are better off. However, in reality, their real purchasing power has not increased.

If You Feel You Are Better Off Because You Receive