Question

Dmitri manages a grocery store in a country experiencing a high rate of inflation. To keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. His employees regularly deal with customer annoyance over the frequent price changes. This is an example of the __________? of inflation.

a. menu costs
b. shoe-leather costs
c. unit-of-account costs

Answer 1

Option (a) is correct.

Step-by-step explanation:

Menu costs of inflation.

Menu costs refers to the cost that is incurred by the company or firms to change the price lists, price tags on the products or uses the medium of newspaper for updating prices. For instance, we are taking an example of clothes shop. If the owner the shop wants to change the prices of the product then he have to change the price tags of the clothes, change the prices on the price list and if he is selling his product online then the cost incurred for changing prices.

So, the menu cost further increases the price of the product which results in inflation.