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.
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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.