Cost+of+Inflation


 * Cost of Inflation**

// *Increase in Income Inequality // - often results in the rich getting richer and the poor getting poorer

*//Trade Deficit:// due to less exports and more imports - there are less exports due to less goods able to be produced in the economy - there are also more imports due to the difference of currency values between countries

*“//Shoe Leather Costs//”: opportunity cost of holding cash - people will spend more time deciding whether to buy now, buy later, or not at all - people also make more visits to their banks and this wears out their shoe soles!

*“//Menu Costs//”: cost to change signage - includes the extra costs to companies to change written information on prices - this is very relevant to companies with large amounts of advertising like flyers or catalogues

*//Reduction in Investment// //-// an original investment’s value will be worth less in the market after inflation - especially if interest rates are negative

*//Business Cycles// - often increases the amount of businesses opening and closing due to fluctuations in things like costs and prices of goods - uncertainty about the future often makes entrepreneurs hesitant about starting new businesses

http://tutor2u.net/economics/content/topics/inflation/costs_of_inflation.htm