What Is the Money Illusion,and How Does It Affect People's

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The Answer is the money illusion is people's tendency to rely on nominal quantities,rather than on real buying power,despite the fact that the nominal value of money is arbitrary,and changes in value as a result of inflation.The money illusion causes people to make fairness assessments of their salaries that are built around whether the nominal dollar amount of the salary is increasing or decreasing instead of adjusting for inflation.Thus,a wage cut is considered unfair,but a nominal increase in wage,that,when taking inflation into account,amounts to the same change as the wage cut,as more acceptable.

What Is the Money Illusion,and How Does It Affect People's

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