The time, money, and effort one spends managing cash in the face of inflation is referred to as:
A) shoe-leather costs.
B) menu costs.
C) tax distortions.
D) the velocity of inflation.

Question

Quizplus · Accepted Answer

Shoe-leather costs refer to the time, money, and effort expended by individuals and firms in managing their cash balances in the face of inflation. This includes the cost of frequent trips to the bank, keeping smaller cash balances, and utilizing other financial instruments to avoid the negative effects of inflation. Therefore, A is the correct answer. Menu costs refer to the cost of adjusting prices in response to inflation, tax distortions refer to the ways taxes can impact economic activity, and the velocity of inflation measures the rate at which money circulates through the economy.

The Time, Money, and Effort One Spends Managing Cash in the Face