Question

7. Identifying costs of inflation Shen manages a grocery store in a country experiencing a high rate of inflation. He is paid in cash twice per month. On payday, he immediately goes out and buys all the goods he will need over 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.

Answer 1

Shoe-leather Costs.

Step-by-step explanation:

In Business management, Shoe-leather costs can be defined as the costs of time and effort people take to counteract the effect of high inflation on the depreciative purchasing power of money by visiting banks or other financial institutions regularly in order to limit inflation tax they pay on holding cash.

Metaphorically speaking, in a bid to protect the value of money or assets, people wear out the sole of their shoes by going to the bank regularly.

Hence, Shen is practicing a shoe-leather cost.