Shoe-leather costs arise from inflation because the velocity of circulation of money ________ as the inflation rate ________.
A) increases; falls
B) decreases; rises
C) increases; rises
D) does not change; rises
E) does not change; falls

Question

Quizplus · Accepted Answer

Shoe-leather costs refer to the increased costs of transactions due to higher inflation, which leads people to hold less cash and make more frequent trips to the bank, thus increasing the velocity of money circulation as inflation rises.

Shoe-Leather Costs Arise from Inflation Because the Velocity of Circulation