Question

Eric manages a grocery store in a country experiencing a high rate of inflation. He is paid in cash. On payday, he immediately goes out and buys as many goods as he can for himself for 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.
a. menu costs
b. shoe-leather costs
c. unit-of-account costs

Answer 1

Answer:

A. Menu Costs

Explanation:

Menu costs are costs resulting from consistent changing in the general nominal prices of goods and services. so like the name suggests menu costs, that is, the list of Consumer Price Index keeps updating like a restaurant food menu. So, Eric buys everything he needs on payday because the face (nominal) value of goods and services is consistently changing making the currency to also lose value.

Answer 2

Answer:

The correct answer is a. menu costs .

Explanation:

Menu costs are those that arise from changes in product prices. In order to implement any sudden change of this type, it is necessary to carry out a very thorough analysis in order to determine if it is profitable for an organization to make changes in prices, this action determines if said increase is enough to cover the costs of that change.