Money illusion is
A) when people think they are better off when their income increases even though prices have increased by the same amount.
B) when people are motivated by self-interest.
C) could not exist if the economy did not have competitive markets.
D) a basic condition that all classical economists assume people have.
A
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How do specialized lending channels created by central banks affect the economy during a recession?
What will be an ideal response?
The economy suffered a mild recession in 2001. Despite the recession, home sales and durable goods sales remained high. Which of the following is a plausible explanation?
A) The Fed's pursuit of contractionary policy stimulated these markets. B) The Fed caused a reduction in the federal funds rate to its lowest level in 40 years. C) Rising inflation encouraged many to invest in the real estate market. D) Home building and consumer durable purchases are always high during a recession.
Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. A recession is depicted by:
A. panel (A) only.
B. panel (B) only.
C. panel (C) only.
D. panels (A) and (B).
The demand curve for a monopolistic competitor slopes downward because: a. quantity demanded drops to zero after a slight price increase
b. there are close, but not perfect, substitutes for the product. c. customers have no loyalty to the product. d. the product is not differentiated in any way from those offered by other sellers.