Question

Bob 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:

Inflation is a persistent rise in general price levels.

shoe-leather costs of inflation is the cost in terms of time and effort spent by individuals in reducing their cash holdings in order to avoid paying inflation tax.

Bob's shoe cost of inflation includes :

1. the time and effort expended in going to purchase items immediately he is paid

2. the time and effort expended in converting the money he didn't spend to a more stable foreign currency.