Money illusion a. occurs when the Federal Reserve reduces the money supply, and is the misperception that prices have changed. b. occurs when output rises, and is the misconception that the price level is higher. c. is the distinguishing factor between the short run and the long run. d. is the misperception that one is wealthier when one's nominal income rises due to an increase in the price level.

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On january 15, the end of the first biweekly pay period of the year, north company’s payroll register showed that its employees earned $32,000 of sales salaries. withholdings from the employees’ salaries include fica social security taxes at the rate of 6.2%, fica medicare taxes at the rate of 1.45%, $3,000 of federal income taxes, $772 of medical insurance deductions, and $260 of union dues. no employee earned > $7,000 in this first period. prepare the journal entry to record north company’s january 15 (employee) payroll expenses and liabilities.