Suppose that, because of inflation, people in Brazil economize on currency and go to the bank each day to withdraw their daily currency needs. This is an example of

Question

a. costs due to confusion and inconvenience.
b. costs due to inflation-induced tax distortions.
c. shoeleather costs.
d. menu costs.
e. costs due to inflation-induced relative price variability, which misallocates resources.

Answer 1

This situation is an example of

c. shoeleather costs.

Shoeleather costs refer to the resources that are wasted when people change their behavior to avoid holding onto cash during periods of high inflation, such as making more frequent trips to the bank to withdraw smaller amounts of money.