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As Inflation Rises, Beware of the Money Illusion. It May Cost You a Lot.

As inflation rises in the U.S., a blind spot known as the money illusion could lead many people to make serious financial mistakes.

Put simply, the money illusion refers to the fact that people typically tend to think in nominal dollars—the actual amount of money spent or earned—and not real dollars, which is the purchasing power of money after taking inflation into account.

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