ECONOMICS (CBSE/UGC NET)

ECONOMICS

INFLATION

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Customers spend more time searching for the best deals, which represents an opportunity cost for customers.
A
Menu costs
B
Shoe leather costs
C
Cost for savers
D
Fixed incomes
E
Borrowers
Explanation: 

Detailed explanation-1: -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-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: -A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else.

Detailed explanation-4: -Like shoe leather costs, menu costs are another costs that inflation imposes on the economy. Menu costs are the costs for businesses to change their listed prices. Businesses have to bear menu costs when they have to change their listed prices more frequently to catch up with high inflation.

There is 1 question to complete.