Purchasing power

Purchasing power is the ability to purchase goods and services with a given amount of money. In other words, it represents the ability of an individual or a community to purchase goods and services based on the real value of the money they possess.

Purchasing power is mainly influenced by inflation and the change in prices of goods and services over time. If inflation is low or stable and prices remain constant, purchasing power tends to remain stronger, as people can buy a similar amount of goods and services with the same amount of money. However, if inflation is high and prices rise rapidly, purchasing power decreases, as people have to spend more for the same goods.

The consumer price index (CPI) is a common tool used to measure inflation trends and their impact on purchasing power. The CPI tracks changes in the prices of a basket of representative goods and services, making it possible to assess how average household expenditure varies over time.

The concept of purchasing power is important in economics, monetary policy and individual financial planning. Wage and income increases are often evaluated in relation to inflation trends and purchasing power, as it is essential to understand how much can actually be purchased with the money earned.

Correlated words


An economic indicator is a collection of data, typically on a macroeconomic scale. These data sets are not just numbers, but powerful tools used by analysts to decipher current or future investment opportunities and gauge the overall health of an economy.

Financial Instrument

A Financial Instrument is a tool or asset used in financial markets for investment, trading, or funding activities, like stocks or bonds.


Bonds are debt securities issued by governments or institutions to raise funds for various financial purposes.


A Deficit in economics signifies a situation where expenses exceed revenues, resulting in a state of financial loss.


Default occurs when an entity fails to meet its debt obligations, potentially leading to bankruptcy or other financial repercussions.


The Consumer Price Index (CPI) is the principal measure used to track inflation, reflecting the average price change over time.


Capital refers to funds or assets for investment or economic activities crucial for business growth and development.

Capital gain

Capital gain is the profit earned from selling an asset at a higher price than its purchase cost, commonly realised in stock markets.

Commercial Bank

Commercial Banks cater to individuals and small businesses, offering deposit accounts, loans, and other traditional banking services.

Central Bank

The Central Bank sits atop the banking hierarchy, working with the government to regulate monetary policy and currency issuance.


Stocks are financial instruments representing ownership shares in a company, entitling holders to a portion of the corporate profits.

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