The costs in time and effort incurred by people and firms who are trying to minimize their holdings of cash because of inflation are called

Question

Quizplus · Accepted Answer

The costs incurred by people and firms in trying to minimize their holdings of cash due to inflation are called shoe leather costs as they might need to frequently visit banks or ATMs to withdraw cash or carry out transactions, which incurs additional time and effort. Menu costs refer to the costs incurred by firms in adjusting their prices frequently due to inflation. Transactions costs refer to any costs incurred in carrying out a transaction, such as fees for using a debit card. Imperfect competition costs refer to the costs incurred due to the lack of competition in a market, such as higher prices for goods and services.

The Costs in Time and Effort Incurred by People and Firms