Inflation and the

Purchasing
Power of Money

Erlyn G. Retoriano
BSA 1-1
INFLATION
is the rise in the general
level of prices of goods and
services in an economy over a
period of time
Purchasing Power of
Money
Purchasing Power

is the value of a currency expressed in

terms of the amount of goods or services
that one unit of money can buy.

 Purchasing power is important because, all

else being equal, inflation decreases the
amount of goods or services you would be
able to purchase.
Effect of Inflation

1. Because unanticipated inflation alters the outcomes of long-term

projects, such as the purchase of machine or an investment in a
business, it will increase the risk and retard the level of such
productive activities.

2. Inflation distorts the information delivered by prices.

3. People will respond to high and variable rates of inflation by

spending less and more trying to protect themselves from inflation.
 Thank you
for listening