Suppose Moni thinks a 100 percent increase in her hourly wage as an incentive to work more hours while the price level also increases by 100 percent. Moni is said to be suffering from
A) money illusion.
B) rationality.
C) irrationality.
D) the effects of competition.

Question

Quizplus · Accepted Answer

Moni is suffering from money illusion as she believes that her wage increase is significant without considering the impact of the increase in the general price level. She is not taking into account the fact that her purchasing power remains the same as before, which shows that she is not acting rationally in her decision-making.

Suppose Moni Thinks a 100 Percent Increase in Her Hourly