Money Illusion

question 29

Multiple Choice

Money illusion:

• A) is the misperception that prices have changed;it occurs when the Fed reduces the money supply.
• B) occurs when output rises.
• C) is the distinguishing factor between the short run and the long run.
• D) is the misperception that one is wealthier;it occurs when the money supply grows.

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Definitions:

Interest Rate

The percentage at which interest is charged or paid on amounts of money, reflecting the price of credit or returns on investment.

Personal Property

Movable property that is not attached to real estate, including vehicles, furniture, and personal belongings.

U.S. Government Bonds

Debt securities issued by the United States Department of the Treasury to fund federal government operations and obligations, considered low-risk investments.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.