Money illusion

We can define money illusion as tendency of the people to think of the currency in the Nominal rather then the real terms .It is economic theory. In other words we can define the money illusion as numerical/face value (nominal value) of money is mistaken for its purchasing power(real Value) at a previous point in the general price level. Real prices and income take into account the level of inflation in the economy.

Do you believe regardless of which theory is applicable, interest rates will continue to vary based on a person’s credit, amount of fixed debt, and debt-to-income ratio?

Answer:

I don’t believe that interest rate continue to vary based on a person’s credit, amount of fixed debt, and debt-to-income ratio.

In real world interest rates vary due to many factors. We can highlight main factor affecting to the interest rates as follow

• Economic Growth
• Fiscal Policy
• Monetary policy
• Inflation

Interest rate is not vary due to vary in person’s credit, amount of fixed debt, and debt-to-income ratio

In our economy today do you believe consumers have an incentive to work for minimum wage

Answer : Yes I believe that in our economy today we have an incentive to work for minimum wage. Such incentive to work for minimum wage may benefit the economy in that it may help push incomes above the poverty line, reducing public expenditure on welfare benefits.

What types of opportunity cost would consumers forgo, if they chose to work for minimum wage

Answer :

If the consumer go for minimum wages then it may have loss of opportunity to gain experience and knowledge to build a resume for themselves.