Q:

Word for thinking something is happening when it's not

Is there a word for the psychological effect of thinking that something is happening and thus feeling the effects of that thing yet nothing is really happening?
An example would be when you get falsely diagnosed with some sort of illness and feel the effects of this illness even though you don't actually have the illness.
I was thinking of calling it "placebo effect", but I think that applies only to being given "medicines" that don't do anything and you feel better due to the way your brain works.

A:

Feeling imaginary symptoms is a kind of delusion.
Macmillan:

delusion
NOUN
2 [UNCOUNTABLE] MEDICAL a mental condition in which you believe things that are not true

A:

Such a condition is  a psychogenic disease.
psychogenic
[sahy-kuh-jen-ik]
adjective Psychology.
having origin in the mind or in a mental condition or process:
a psychogenic disorder.
From dictionary.com

EDIT (by third party):
As m69 points out in a comment below, the word psychosomatic is often used to refer to physical symptoms with psychogenic components.  From the Wikipedia article on Psychosomatic medicine:

Psychiatry traditionally distinguishes between psychosomatic
  disorders, disorders in which mental factors play a significant role
  in the development, expression, or resolution of a physical illness,
  and somatoform disorders, disorders in which mental factors are the
  sole cause of a physical illness.

Thus, somatoform disorder describes the condition of physical symptoms arising from purely psychological origins.  This has been known in prior years as a somatization disorder.

