How does Inflation Affect Purchasing power? To begin to understand how it works, it helps to know what purchasing power is and how it’s defined. Investopedia defines purchasing power as “the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.” So when we discuss purchasing power, we aren’t in this context talking about how much money you have and how many things you can buy with your financial resources, but rather the actual value of the money itself. Remember how your older relatives would talk about buying a candy bar for 25 cents “back in the day” and how expensive they seem now by comparison? How far that 25 cents went back then compared to how far your 25 cents will go now is the kind of purchasing power we’re talking about here. And it’s not always as simple as ...

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