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Shoeleather Cost

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PPGPortal > Home > Concept Dictionary > S > Shoeleather Cost
 
Shoeleather Cost

The resources wasted when inflation encourages people to reduce their money holdings.

(Principles of Macroeconomics 4th Canadian Edition by Mankiw, Kneebone, McKenzie, and Rowe p.254)

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The cost of reducing your money holdings is called the shoeleather cost of inflation because making more frequent trips to the bank causes your shoes to wear out more quickly.  Of course, this term is not to be taken literally; the actual cost of reducing your money holdings is not the wear and tear on your shoes but the time and convenience you must sacrifice to keep less money on hand than you would if there were no inflation.
     
Shoeleather Cost

The resources wasted when inflation encourages people to reduce their money holdings.

(Principles of Macroeconomics 4th Canadian Edition by Mankiw, Kneebone, McKenzie, and Rowe p.254)

---------------------------------

The cost of reducing your money holdings is called the shoeleather cost of inflation because making more frequent trips to the bank causes your shoes to wear out more quickly.  Of course, this term is not to be taken literally; the actual cost of reducing your money holdings is not the wear and tear on your shoes but the time and convenience you must sacrifice to keep less money on hand than you would if there were no inflation.

Approved for glossaryposting by Ben Eisen on December 6, 2010


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