Healthy younger and older adults and individuals with very mild or mild dementia of the Alzheimer type (DAT) listened to and read fictional stories containing correct and incorrect facts about the world. Of interest was their use of this story information to answer questions on a later test of general world knowledge. Prior exposure to relatively well-known facts boosted all subjects' ability to correctly answer general knowledge questions. Reading incorrect facts in the stories led to misinformation effects in healthy older adults (although these effects were smaller than those observed in younger adults). DAT individuals showed reduced effects of story exposure; effects were greatest in a situation that reminded DAT individuals that the stories might provide the answers to the questions. Benefits of story reading depended on activation of the semantic network, whereas costs of story reading were more dependent on episodic memory processes.