All else equal, if workers confuse real and nominal magnitudes, they are experiencing
A) expectations of inflation.
B) money illusion.
C) monetary confusion.
D) fiscal policy.

Question

Quizplus · Accepted Answer

Money illusion refers to a situation where workers or individuals confuse nominal and real magnitudes. For instance, if workers receive a 2% nominal wage increase but inflation is also 2%, then their real wage has not increased. However, if workers focus solely on the nominal increase and overlook the inflation, they are experiencing money illusion.

All Else Equal, If Workers Confuse Real and Nominal Magnitudes