Purchasing Power
Financial glossary definition
Definition
The quantity of goods and services that a unit of currency can buy. As inflation rises, purchasing power falls — meaning you need more money to buy the same things.
Related Terms
Consumer Price Index (CPI)
A measure of the average change in prices paid by consumers for a basket of goods and services. The …
Deflation
A decrease in the general price level of goods and services — the opposite of inflation. While lower…
I-Bond
A US savings bond whose interest rate adjusts every 6 months based on inflation (CPI). I-Bonds provi…
Inflation
The rate at which the general level of prices for goods and services rises over time, eroding purcha…
Nominal Return
The raw percentage return on an investment before adjusting for inflation. A 10% nominal return with…
PMI (Private Mortgage Insurance)
Insurance required by lenders when a homebuyer makes a down payment of less than 20%. PMI protects t…