Money illusion: Difference between revisions
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'''Money illusion''' is a phenomenon whereby a person pays more attention to the ''nominal value'' of money (i.e., the number of currency units) as opposed to the ''real'' value of money, i.e., its purchasing power. | '''Money illusion''' is a phenomenon whereby a person pays more attention to the ''nominal value'' of money (i.e., the number of currency units) as opposed to the ''real'' value of money, i.e., its purchasing power. | ||
Money illusion is considered responsible for [[sticky price]]s and [[sticky wage]]s, though other factors, such as [[menu cost]]s, are also probably at work. | Money illusion is considered responsible for [[price stickiness|sticky price]]s and [[sticky wage]]s, though other factors, such as [[menu cost]]s, are also probably at work. | ||
Latest revision as of 17:01, 15 April 2017
Definition
Money illusion is a phenomenon whereby a person pays more attention to the nominal value of money (i.e., the number of currency units) as opposed to the real value of money, i.e., its purchasing power.
Money illusion is considered responsible for sticky prices and sticky wages, though other factors, such as menu costs, are also probably at work.