Question

Gilberto 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

Answer: shoe-leather costs

Explanation: Inflation is defined as an increase in the general level of prices or in the cost of living that causes the real value of money to decrease  (devaluation of existing money) and thus  imposes cost on the economy. Shoe leather costs are costs that arise from from an increase in the velocity of circulation of money and an increase in the amount of running around that people such as Gilberto engage in to try to avoid the losses from the falling value of money. It also refers to the increased costs of transactions caused by inflation.

Answer 2

Answer:

Shoe leather cost.

Explanation:

Inflation can be defined as the persistent rise in the price of goods and services in an economy.

Shoe leather costs refers to the time and efforts put in by individuals to prevent the various effects of inflation which include high interest rate, Increase in taxes, low rate of exports, low savings.

Gilberto tries to prevent the effect of inflation by converting the money he did not spend on purchasing goods into a more stable foreign currency for a steep fee.