Prince Charles visits some Greek islands on a regular basis. While there he pays for his hotel stay and other several high cost purchases with checks. After he leaves, the vendors do not cash these checks but instead continue to use them as 'cash'. The checks are never cashed because they considered just as good as cash, since Prince Charles is so well known and his money is always 'good'.

Question: Who pays for Prince Charles' stay at the hotel and other purchases?
There are two answers and I only know one. What is Answer #2?

Answer #1: The consumers on the island pay because the abundance of checks issued to the islanders is so great that it causes inflation, which in turn raises the cost of goods on the island and expenses to the consumers.

Thanks!

I would say the answer is: whoever is holding the check at the current time is covering the cost - effectively making an interest free loan to Prince Charles. When that person unloads the check on the next person, in exchange for goods and servics he receives, then that next person becomes Prince Charles's creditor.