Question

kyoko 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, kyoko 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

Answer 1

The above situation is an example of shoe leather cost of inflation.

A shoe-leather cost is what people pay when they frequently visit the bank to withdraw cash to use to pay for products in the wake of intense inflationary pressure. The term "shoe-leather cost" symbolizes all costs, including time spent, bank fees, brokerage fees and transportation costs.

High inflation discourages people from keeping large sums of cash on hand because the value of money rapidly depreciates during this time. More money is kept in banks by them. Additionally, repeated price increases force people to constantly withdraw money for transactional needs. Due to this, they frequently visit their bank to withdraw cash in order to pay for goods and services. These frequent journeys degrade their shoe leather, resulting in a 'shoe-leather cost.'

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