Explain menu costs and shoe leather costs as they relate to inflation
What will be an ideal response?
When there is inflation, menu costs refer to the actual physical costs of changing prices, as would be necessary for printed material such as catalogs, price tags and restaurant menus. Shoe leather costs refer to the costs involved with holding less cash. When there is inflation, people will tend to want to hold less cash, since the value of cash being held will decrease. If less cash is held, more frequent trips to banks or ATMs will be necessary when people need cash.
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Refer to the figure above. A change in the budget constraint from B2 to B3 indicates:
A) a decrease in the price of jeans. B) a decrease in the price of sweaters. C) an increase in the consumer's income. D) a decrease in the consumer's income.
For a particular farmer and a single growing season, the amount of seed that is planted would be considered a variable input
Indicate whether the statement is true or false
The bulk of the M1 money supply is made up of
A. travels checks. B. checkable deposits. C. Federal Reserve notes. D. currency.
Fixed costs are best defined as
A. costs that will not vary with the firm's output level over some period of time. B. costs that are paid on a yearly basis rather than a weekly or monthly basis. C. costs of inputs that cannot be moved, such as real estate. D. costs that will last as long as the firm exists.