Question

7. Identifying costs of inflation

Juanita 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, Juanita sends an employee to the bank four times per day to make deposits in an interest-bearing account that protects the store's revenues from the effects of inflation. This is an example of the ________ of inflation.

A. Menu Costs
B. Unit of account costs
C. Shoesleather costs

Answer 1

C. Shoesleather costs

Step-by-step explanation:

Shoe-leather costs refer to the time, energy and effort people take such as holding less amount of money and going to the bank quite often to make deposits in order to counteract the effect of inflation on the eroding purchasing power of money.

In order to prevent the value of money in her cash register from falling too quickly, Juanita sends an employee to the bank four times per day to make deposits in an interest-bearing account that protects the store's revenues from the effects of inflation.

Hence, this is an example of the Shoes-leather costs of inflation.