Purchasing Power

Purchasing Power refers to the financial ability of an individual or group to buy goods and services with a given amount of Money. It is influenced by factors such as income levels, inflation rates, and the cost of living.

For example, if a person’s salary increases from $50,000 to $60,000 without any change in prices, their purchasing power has increased, allowing them to buy more goods and services. Conversely, if inflation rises and the prices of goods increase significantly while income remains the same, purchasing power decreases, limiting what can be bought.

In cases like Hyperinflation, such as in ZiMBAbwe in the late 2000s, the purchasing power of the local currency plummeted, meaning that even large sums of Money could buy very little. In contrast, during periods of economic stability and growth, such as in post-war economies, purchasing power tends to increase as wages rise and prices stabilize.