The countries with highest to lowest menu cost using average inflation. Concept Introduction Inflation: Inflation refers to the rise in the prices of goods and services and on the other hand it decreases the currency’s value. Inflation causes few economic costs which are listed as follows: Shoe-Leather Cost: People hold cash in hand and deposit cash in their bank accounts as well. When inflation rises and the value of money falls, people start to reduce the money they hold. This involves a cost which is known as shoe-leather cost. Menu Cost: When the inflation rises, the price of every good and service in the economy also rises. The producers need to change to prices listed on their products and services. This involves a cost which is known as menu cost. Unit-of-Account Cost: When the inflation rises, the value of currency falls. This implies that as the inflation rises from this year to next year, the value of currency will be less next year as compared to this year. This involves a cost which is known as unit-of-account cost.

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Chapter 14, Problem 11P

To determine

To determine: The countries with highest to lowest menu cost using average inflation.

Concept Introduction

Inflation: Inflation refers to the rise in the prices of goods and services and on the other hand it decreases the currency’s value. Inflation causes few economic costs which are listed as follows:

Shoe-Leather Cost: People hold cash in hand and deposit cash in their bank accounts as well. When inflation rises and the value of money falls, people start to reduce the money they hold. This involves a cost which is known as shoe-leather cost.

Menu Cost: When the inflation rises, the price of every good and service in the economy also rises. The producers need to change to prices listed on their products and services. This involves a cost which is known as menu cost.

Unit-of-Account Cost: When the inflation rises, the value of currency falls. This implies that as the inflation rises from this year to next year, the value of currency will be less next year as compared to this year. This involves a cost which is known as unit-of-account cost.

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