00:01
In the following examples, is inflation creating winners and losers at no net cost to the economy, or is inflation imposing a net cost on the economy? if a net cost is being imposed, which type of cost is involved? when inflation is expected to be high, workers get paid more frequently and make more tips to the bank.
00:21
When inflation is expected to be high, workers get paid more frequently and they make more trips to the bank.
00:26
This is an example of the effect of shoe leather costs, a net cost of inflation to the economy.
00:31
Workers spend valuable resources going to the bank more frequently and firms spend valuable resources such as bookkeepers time and paying workers more frequently.
00:41
Lonway is reimbursed by her company for her work -related travel expenses.
00:46
Sometimes, however, the company takes a long time to reimburse her.
00:49
So when inflation is high, she's less willing to travel for her job.
00:53
So she's reimbursed for her work -related travels, but they can take a long time to reimburse her.
01:00
So if inflation's high, she's not going to be as well.
01:03
Willing to travel because when she finally gets paid, that dollar is worth less when she finally gets it than it was when she spent it.
01:12
This is an example of unit of account costs.
01:16
A dollar when looney spends it on a work -related expense is worth more than the dollar she receives much later in reimbursement from her company.
01:25
Because she is willing to travel, less willing to travel for her job, there is a net cost of the economy of her foregone output...