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Jet001 [13]
3 years ago
5

7. Identifying costs of inflation 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.
Business
1 answer:
stiks02 [169]3 years ago
5 0

Answer:

Shoe-leather Costs.

Explanation:

In this scenario, 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 Shoes-leather costs of inflation.

A Shoe-leather costs refers to the costs of time, energy and effort people expend to mitigate the effect of high inflation on the depreciative purchasing power of money by frequently visiting depository financial institutions in order to minimize inflation tax they pay on holding cash.

Metaphorically, it ultimately implies that in order to protect the value of money or assets, some people wear out the sole of their shoes by going to financial institutions more frequently to make deposits.

Hence, Bob is practicing a shoe-leather cost of inflation so as to reduce the nominal interest rates.

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Countries due to globalization tends to participate in international trades. Competition in the international trade has its advantages as well as its disadvantages or risks.

To trade in the international market, countries must have their individual strategies and Option D above is NOT a inherently complex reason when crafting a strategy to compete in one or more foreign markets

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