Longman Dictionary of Contemporary English
Wiktionary
n. (context economics English) The amount of goods and services that can be bought with a unit of currency or by consumer.
Wikipedia
Purchasing power (sometimes retroactively called adjusted for inflation) is the number of goods or services that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it is probable that it would have been possible to buy a greater number of items than would today, indicating that one would have had a greater purchasing power in the 1950s. Currency can be either a commodity money, like gold or silver, or fiat money emitted by government sanctioned agencies. Traditionally, the purchasing power of money depended heavily upon the local value of gold and silver, but was also made subject to the availability and demand of certain goods on the market. Most modern fiat currencies like US dollars are traded against each other and commodity money in the secondary market for the purpose of international transfer of payment for goods and services. As Adam Smith noted, having money gives one the ability to "command" others' labor, so purchasing power to some extent is power over other people, to the extent that they are willing to trade their labor or goods for money or currency.
If one's monetary income stays the same, but the price level increases, the purchasing power of that income falls. Inflation does not always imply falling purchasing power of one's money income since it may rise faster than the price level. A higher real income means a higher purchasing power since real income refers to the income adjusted for inflation.
For a price index, its value in the base year is usually normalized to a value of 100. The purchasing power of a unit of currency, say a dollar, in a given year, expressed in dollars of the base year, is 100/P, where P is the price index in that year. So, by definition the purchasing power of a dollar decreases as the price level rises. The purchasing power in today's money of an amount C of money, t years into the future, can be computed with the formula for the present value:
$$C_t = C(1 + i)^{-t}\, = \frac{C}{(1+i)^t} \,$$
where in this case i is an assumed future annual inflation rate.
Adam Smith used an hour's labour as the purchasing power unit, so value would be measured in hours of labour required to produce a given quantity (or to produce some other good worth an amount sufficient to purchase the same).
Usage examples of "purchasing power".
The rich have done fine because they had significant amounts of wealth in hard currency, often outside the country, that actually increased their purchasing power in Iraq as a result of the inflation.
Not only does fractional reserve banking erode your purchasing power, you also pay in the same way for deficit spending by government.
Either the price should be lowered in the Macedonian market - or an average world price should be fixed which will reflect an average global purchasing power.
There it is a cost charge against the new production, leaving a net shortage in necessary purchasing power.
Since the solan was only a name, a bit of ncepaper, and a number in a ledger, it had to be defined in terms of its purchasing power To some extent once the monetary system was in place and functioning, its value de fined itself simply by the practice of money users But most of the years between the Landsraad vote ol 485 and the initial distnbu tion of solans in 491 were devoted to mtn cate negotiations to fix the starting point for the system The Guild subtly and effectively resisted any tendency of the emperor or the Landsraad to single out the price of spice as a fundamental determinant Instead the Guild negotiators proposed a complex formula of .
Gavin fingered the few coins in his pocket and estimated their purchasing power.
Adler passed thirty percent this morning, but it looks like their purchasing power has begun to dryup.
Many of these coins, though quite different in value and purchasing power, contained about the same amount of gold.
At the end of twenty years, when the groundwork of the project is complete and everything is in operation, that fund of reserved purchasing power will be used to buy back for the country whatever item still mortgaged is judged most essential to our independent development.
Before close of day we'd hold another meeting, which I would keep to some specific topic, such as: integration of Starrzelius products into the Venus economy, or income-level of prospective Venus colonists for optimum purchasing power twenty years after landing.