An individual who suffers from money illusion will
A)feel that a doubling of prices and income improves his economic position.
B)concentrate on relative prices.
C)never be fooled by the impact of price changes on the purchasing power of income.
D)try to use counterfeit money.

Question

Quizplus · Accepted Answer

Money illusion refers to the tendency of individuals to view changes in nominal prices and income as reflective of changes in real purchasing power, even when those changes are solely due to inflation or deflation. Thus, an individual with money illusion would feel that a doubling of prices and income improves his economic position, even though his real purchasing power has not changed.

An Individual Who Suffers from Money Illusion Will