Thursday, February 9, 2012

What is Money Illusion? ---> "A nickel ain't worth a dime anymore" / "5 cents is not worth 1 cent, anymore!"

Link for a good article on Money Illusion: http://psych.princeton.edu/psychology/research/shafir/pubs/Money%20Illusion.pdf

Money Illusion ---> The tendency to think in terms of NOMINAL, rather than REAL monetary values.

The layman, the common man who is not educated in Finance may not be aware aware / or may not always consider that a certain amount, say $10 in the future is not the same as $10 today. This ignorance or lack of perception is the behind concept of money illusion.

Is your salary keeping pace with inflation? Unless you have a magic trick like this to make money grow, your income better keep up with inflation :)

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