ABSTRACT
"Money illusion" as a concept is frequently referred to and, also, frequently rejected, where a ubiquitous belief in rationality dictates the trend of money illusion as being distant from standard economic thinking. The money illusion refers to the tendency of individuals to think more in nominal monetary values than in real ones. This chapter describes the early theorizing of economists about money illusion, its roots and origins. It deals with money illusion as contained in the works of John Maynard Keynes, which is scrutinized due to its rather implicit presence in Keynes' work. Money illusion also found a place in the field of behavioral economics, which witnessed a resurrection of money illusion in some aspect, as shown by Akerlof (2002) or Shafir et al. (1997), who don't presume that people are completely deceived by money illusion.
