Shoeleather cost refers to

a. the cost of more frequent price changes induced by higher inflation.
b. the distortion in resource allocation created by distortions in relative prices due to inflation.
c. resources used to maintain lower money holdings when inflation is high.
d. the tendency to expend more effort searching for the lowest price when inflation is high.


c

Economics

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Based on the figure below, the economy is initially at point A on the monetary policy reaction function (RF1) and the aggregate demand curve (AD1). The actual rate of inflation is p' and the Federal Reserve's target inflation rate is p*1. If the Federal Reserve raises its target inflation rate to p*3, then the Federal Reserve's monetary policy reaction function will ________ and the aggregate demand curve will ________.

A. shift to RF2; shift to AD2 B. shift to RF3: shift to AD3 C. shift to RF3; shift to AD2 D. shift to RF2: shift to AD3

Economics

How would you expect the Fed to respond to a negative supply shock in the economy?

What will be an ideal response?

Economics

If prices in the diamond market become less volatile, all else equal, then the demand for diamonds ________ and the demand for gold ________

A) increases; decreases B) increases; increases C) decreases; decreases D) decreases; increases

Economics

Which of the following actions did Congress take in the 1930s, in an effort to prevent future financial crises like the stock market crash of 1929?

A. Glass-Steagall Banking Act B. Bubble Act C. Formation of the CBO (Congressional Budget Office) D. Hastings Banking Act

Economics