Question

acques 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.

Answer 1

This is an example of shoe-leather costs.

Explanation:

The term inflation refers to the increase in prices of any goods or services that finally leads to a decrease in the purchasing value of money. The opportunity cost of time and effort that is expended by the people to hold only less cash in their hands refers to the shoe leather cost.

This helps them to cope up with the inflation that is of higher and when there occurs a reduction in the inflation tax.These shoe leather costs are the efforts of the people holding only a lesser amount of money in their hand as a counteract measure to the increase in inflation. Thus the given example is realted to the shoe-leather costs.