Question

Larry manages a grocery store in a country experiencing a high rate of inflation. To keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. His employees regularly deal with customer annoyance over the frequent price changes. This is an example of the __________? of inflation.

a. menu costs

b. shoe-leather costs

c. unit-of-account costs

Answer 1

Answer:

Option (a) is correct.

Explanation:

Menu costs:

Menu costs refers to the costs which arises because of the change in the prices by the firms. Different type of firms have incurred different menu costs.

For instance, it is necessary to change the price tags, update price lists, update shelf prices. This makes less demand for the product by the consumers because menu costs increases the price of the product.