Question

Shoe-leather costs of inflation arise from the

Select one:

a. increasing costs of agricultural products as inflation rises.

b. increase of velocity as inflation rises.

c. increasing costs of apparel (clothes and shoes) as inflation rises.

d. decline in the use of money as a unit of account.

e. confusion that results from higher inflation.

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Answer 1

Answer

Option b

b. the increase of velocity as inflation rises.

The shoe-leather cost means the cost of holding less cash to compensate for the decreasing value of money.

Velocity is the number of times cash changes hand

if the velocity increases the cost of holding cash and inflation increases.