_____________. The concept, credited to British economist John Maynard Keynes, has been heavily criticized for its assumption that people are naïve. The theory of rational expectations, which among other things states that people learn from experience and can reset their earlier beliefs, was a response to the idea of money illusion.

Question

Examsnet · Accepted Answer

Correct Answer is : The notion that people care more about the nominalvalue of money rather than its real value. Accordingto this idea, workers, for instance, would be impressedif their wages double in a year even if the real value oftheir money were to drop by more than half during thesame period.

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