Question

Janis owns and operates a store in a country experiencing a high rate of inflation. In order to prevent the value of money in her cash register from falling too quickly, Janis sends an employee to the bank four times per day to make deposits in a interest-bearing account that protects the store's revenues from the effects of inflation. This is an example of the (Menu Costs/ Unit of account costs/ Shoesleather costs) of inflation. Pick one

Answer 1

This is an example of shoe leather cost.

Step-by-step explanation:

Inflation in an economy causes the purchasing power of money to reduce or decreases the real value of cash balances. To avoid this some effort to reduce the deduction of purchasing power. The cost of time and effort spent on these attempts are called shoe-leather costs.

In the given example, going to the bank frequently to deposit money incurs certain costs which are shoe-leather costs.