Purchasing Power

Definition

Purchasing power refers to the amount of goods and services that can be bought with a given amount of money. It is influenced by changes in prices and inflation.

Related terms

Inflation: Inflation is the general increase in prices over time, which reduces the purchasing power of money.

Consumer Price Index (CPI): CPI measures changes in the average price level of goods and services purchased by households, providing an indicator for inflation.

Nominal Income: Nominal income is the actual dollar amount earned or received without adjusting for inflation.