Purchasing power of money refers to the amount of goods or services that can be purchased with a unit of currency. It measures how much real value money has in terms of what it can buy.
Related terms
Real income: Income adjusted for changes in purchasing power due to inflation.
Nominal value: The face value or stated value of something, without adjusting for changes in purchasing power.
Money illusion: When individuals mistakenly assume that changes in nominal values reflect changes in real values without considering inflation effects.