number and quality or value of goods and services that can be purchased with a unit of currency
Purchasing power is the amount of goods and services you can buy with a specific amount of money. It matters because when purchasing power changes—such as when prices rise or fall—the same dollar bill can buy you more or less than it could before, directly affecting your standard of living.
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Purchasing power refers to the amount of products and services available for purchase with a certain currency unit. For example, if one spends a single unit of currency at a store to purchase products, then returns at a later date and spends a single unit of currency but is unable to purchase as many products as they had previously, the currency's purchasing power has decreased.
If one's income remains constant but prices rise, their purchasing power decreases. Inflation does not always result in decreased purchasing power, especially if income exceeds price levels. A larger real income means more purchasing power, as it corresponds to the income itself.
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