The “Moon illusion,” in which the Moon appears larger than normal when close to the horizon, is not the result of magnification by the atmosphere or a change in Earth-Moon distance. Instead, the answer is, as Einstein might say, completely relative.
At most times we see the Moon high in the sky among thousands of stars. We develop our sense of how “big” the Moon ordinarily appears by comparing it with the vast panorama of outer space.
When the Moon is nestled along the horizon, however, we see it surrounded by a foreground of familiar Earth-bound objects — trees, buildings, or distant landmarks. In comparison with these everyday features, the bright disk of the full Moon appears quite large indeed, and relative to our “normal” sense of the Moon’s size, much bigger than we would expect.