Question

Larry manages a grocery store in a country experiencing a high rate of inflation. He is paid in cash. On payday, he immediately goes out and buys as many goods as he can for himself for the next two weeks in order to prevent the money in his wallet from losing value. What he can't spend, he converts into a more stable foreign currency for a steep fee. This is an example of the of _______? inflation.

a. menu costs

b. shoe-leather costs

c. unit-of-account costs

Answer 1

Shoe leather costs of inflation

Step-by-step explanation:

Shoe leather costs is basically a metaphor used to describe the cost of efforts and time in order to defeat the effects of inflation.

Here in the given instance also Larry buys the goods in bulk as in high inflation value of money decreases and with bulk purchase the money is saved, and there is a less chance to get goods after the value of money is decreased even more.

Stocking goods for use for 2 weeks prevents Larry for 2 weeks to fight against inflation as there is so much costs involved to earn such money and then fight against inflation.