ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is not considered a cost of inflation?
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Shoe-leather costs
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Output costs
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Menu costs
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unit of account costs
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Explanation:
Detailed explanation-1: -Resources will be misallocated. Resource allocation is unrelated to inflation.
Detailed explanation-2: -Shoeleather costs, menu costs, and misallocation of resources are three costs of inflation that shrink consumer wealth.
Detailed explanation-3: -Deflation: Deflation is the reverse of inflation. It refers to a sustained decline in the price level of goods and services.
Detailed explanation-4: -The correct answer is (d) It describes both increases in prices and decreases in prices. Inflation only refers to the increase in the price level of commodities in the market not the decrease of their prices. The decrease in the price level of commodities is represented by deflation not inflation.
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