Joe's increase in wages has been identical to the increase in the ...

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Joe's increase in wages has been identical to the increase in the price level. Joe thinks that he is better off and has increased his expenditures. Joe's behavior is consistent with
 
  A) the classical model. B) Say's law.
  C) money illusion. D) a vertical aggregate supply curve.

Question 2

Jacob buys less soda when the price of soda rises 10 percent, while the prices of all other goods also rise 10 percent. Jacob is
 
  A) behaving in accordance with classical economic theory.
  B) worrying too much about a coming recession.
  C) suffering from money illusion.
  D) paying too much attention to changes in relative prices.

[cassie_ragen]

Answer to Question 1

C

Answer to Question 2

C

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[Sarahjh]

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