If your nominal wage rises but you think that it automatically means your real wage rose,then:
A) you are suffering from money illusion.
B) you are experiencing the substitution effect.
C) you are suffering from the heterogeneity illusion effect.
D) you are experiencing the income effect.
E) you are suffering from the price confusion problem.

Question

Quizplus · Accepted Answer

Money illusion is the tendency for people to think of their income and other financial assets in nominal, rather than real, terms. Nominal income is the amount of money that a person earns in a given period of time, while real income is the amount of goods and services that a person can actually buy with their income. If someone thinks that their real wage has risen just because their nominal wage has risen, then they are suffering from the money illusion.

If Your Nominal Wage Rises but You Think That It