Trade · 6 pages · 12 min
How purchasing power is a comparison
Purchasing power is what a sum of money can buy, judged against a basket, a place, or a date.
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From the opening
Purchasing power is the quantity of goods and services a unit of money can command. A claim that money gained or lost it is always a comparison with some earlier date, some other place, or some other currency's basket. The opening covers always judged against a basket, indexes compare two dates, and places require local prices.
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Inside
- Always judged against a basket
- Indexes compare two dates
- Places require local prices
- Raw wages skip the basket
- Where the idea stops applying
- A distinction worth keeping
Sources
- Cost-of-living price index
- Purchasing power parity baskets