Money illusion. The propensity to respond to change in money magnitudes as if they represented changes in real magnitudes. For example, suppose that your money income and the prices of all goods which you could buy were simultaneously doubled. Any set of purchases you previously could afford you can still afford; any set you could not.
Money supply afford still cannot be bought.
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If the set of purchases you previously made was the one you preferred out of all those available to you, there is absolutely no reason for you to change it now. On the other hand, if because your money income has risen you feel richer and now buy more of the luxury goods and less of the necessities, you would be said to be suffering from money illusion, since you have not realized that your real income has remained the same.
Money in circulation, money which is being used to finance transactions, as opposed to idle money (O inactive money).
Money, inactive inactive money.
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