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Edison 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

Sagot :

The above-given situation is an example of shoe-leather costs.

What is inflation?

  • In the field of economics, inflation refers to an overall rise in the cost of goods and services throughout a nation.
  • Each unit of currency may purchase fewer products and services as the general price level rises, hence inflation is associated with a decline in the purchasing power of money.

What are shoe-leather costs?

  • The cost to individuals who must make numerous trips to the bank to withdraw more money for goods and services during periods of high inflation is referred to as a "shoe-leather cost."
  • The phrase "shoe-leather cost" refers to how much your shoes will deteriorate if you walk to the bank more frequently.

Therefore, the above-given situation is an example of shoe-leather cost.

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