If your income and the price level both double, 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 is an example of money illusion, where one is fooled by nominal increases in income without accounting for the change in price levels. Real income, which accounts for inflation, has actually remained the same.

If Your Income and the Price Level Both Double, and You