ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A shoe-leather cost refers to cost individuals incur from frequent visits to bank to withdraw money for purchasing goods and services in the wake of high inflationary pressure. The name ‘shoe-leather cost’ metaphorically refers to all costs-transportation cost, brokerage fee, bank charges, time spent etc.

Detailed explanation-2: -Essentially, shoe-leather costs refer to the time and effort people take to minimize the effect of inflation on the eroding purchasing power of money. People wear out their shoes on the way back and forth to the bank, so to speak, trying to protect the value of their assets.

Detailed explanation-3: -What are shoe leather costs? Shoe-leather costs refer to the time and effort it takes you to minimize the impact of inflation on your finances. The term comes from the physical shoe leather that people would wear out while making repeated trips to the bank.

Detailed explanation-4: -Examples of shoe leather costs include the time that people spend going to the banks to convert money into foreign currency and the actual money costs that businesses incur by hiring someone to convert money at the banks.

Detailed explanation-5: -Shoe leather costs are the costs that people incur to minimize their cash holdings during times of high inflation. Inflation causes the purchasing power of the currency to go down. This will make people rush to the bank to convert their currency to other stable assets.