In general, people seem to know that inflation is often not a good thing in the economy. This makes sense, to some extent – inflation refers to price increases, and price increases are often considered a bad thing. However, technically, if the prices of different goods and services rise in unison, if wages rise as prices rise, and if nominal interest rates are adjusted according to changes in inflation, then the rise in total price levels is not necessarily a problem. . (In other words, inflation does not necessarily reduce the actual purchasing power of consumers.) However, from an economic perspective, the cost of inflation is relevant and not easy to avoid. When prices stay the same for a long time, companies can benefit because they don’t have to worry about changing the price of production. On the other hand, when prices change over time, it is best for companies to change prices to keep up with the overall price trend, as this will be a profit maximization strategy. Unfortunately, changing prices is usually not costless because changing prices requires printing new menus, relabeling, and more. These costs are called, and the company must decide whether to operate at a price that is not profit maximized or to generate menu costs involved in price changes. Either way, the company is taking on very real inflation costs. Although the company is a company that directly incurs menu costs, the cost of footwear leather directly affects all currency holders. When there is inflation, there is a real cost of holding cash (or holding assets in a interest-free deposit account) because cash does not buy as much cash as it does today. As a result, citizens have the incentive to keep cash as little as possible, which means they must often go to the ATM or otherwise transfer money. The term footwear leather cost refers to the metaphorical cost of changing shoes more frequently due to the increased number of times to the bank, but the cost of footwear leather is a very real phenomenon. In economies with relatively low inflation, Shoeleather costs are not a serious problem, but they become very important in economies that experience hyperinflation. In these cases, citizens are generally more willing to keep their assets as foreign currencies rather than local currencies, which also consumes unnecessary time and effort. Certain industries and services become cheaper or more expensive in a relative sense when inflation occurs and prices of different goods and services rise at different rates. These relative price distortions, in turn, affect the allocation of resources to different goods and services, which would not happen if the relative price remained stable. Unexpected inflation can be used to redistribute wealth in the economy because not all investments and debts are linked to inflation. Higher-than-expected inflation reduces the actual value of debt, but it also reduces the actual rate of return on assets. As a result, unexpected inflation can hurt investors and benefit those who are heavily in debt. This may not be the motivation that policymakers want to create in the economy, so it can be seen as another piece of inflation. In the United States, many taxes do not automatically adapt to inflation. For example, capital gains tax is calculated based on the absolute increase in the value of the asset rather than the adjusted value increase in inflation. Therefore, when there is inflation, the effective tax rate on capital gains may be much higher than the nominal interest rate. Similarly, inflation increases the effective tax rate on interest income. Even if prices and wages are flexible enough to accommodate inflation, inflation still makes the comparison of the amount of money over the years more difficult than it actually is. Given the fact that people and companies want to fully understand their wages, how assets and debts develop over time, the fact that inflation makes it more difficult to do so can be seen as another cost of inflation.