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What is Purchasing Power?
Purchasing power of a currency refers to the amount of goods and services that a single unit of currency can buy. Purchasing power of a currency defines the rate of exchange of the currency in the international market and, hence, the value of currency in the competitive International market.
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Why is it Important?
The importance of purchasing power is that in spite of everything being equal, during inflation, the amount of goods and services that you’d be able to purchase with a said amount decreases—and, hence, the purchasing power shatters. So, whether or not there’s an economic emergency or a boom can be understood with Purchasing Power of a currency.
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