If your income and the price level both rise by 5 percent, and you think you now have more real income, you are suffering from
A)diminishing marginal expectations.
B)leakages.
C)injections.
D)money illusion.

Question

Quizplus · Accepted Answer

This scenario describes a situation of money illusion, where individuals believe their purchasing power has increased due to a rise in nominal income, without realizing that the price level has also increased. As a result, there is no real increase in buying power, indicating a misunderstanding of the true value of money.

If Your Income and the Price Level Both Rise by 5