Purchasing Power
 |
Definition of 'Purchasing Power'1. 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'd be able to purchase.2. In investment terms, the dollar amount of credit available to a customer to buy additional securities against the existing marginable securities in the brokerage account. |
 |
Investopedia explains 'Purchasing Power'1. To measure purchasing power, you'd compare against price index such as CPI. A simple way to think about purchasing power is to imagine if you made the same salary as your grandfather. Clearly you could survive on much less a few generations ago, however, because of inflation, you'd need a greater salary just to maintain the same quality of living.2. Each jurisdiction has its own rules governing margin transactions. In the United States you can purchase up to 50% of securities on margin, so, if you had $10,000 in a margin account, you'd be able to purchase up to $20,000 worth of securities. Said another way, you have an extra $10,000 of purchasing power (buying power). |
Related Definitions
Articles Of Interest
-
What You Should Know About Inflation
Find out how this figure relates to your investment portfolio. -
The President's Council Of Economic Advisers
We'll look at the history of the Council, describe its functions and explore some of its most important decisions. -
Fight Back Against Inflation
Inflation is often a consequence of economic recovery. Here's how you can protect your financial portfolio. -
Why did the U.S. government take control of the steel industry in 1952?
In early 1950, Senator McCarthy began seeing communists in every shadow, prompting him to accuse the Truman administration of being soft on the rampant communism spreading across the globe. When ... -
What is the difference between inflation and stagflation?
Inflation is a term used by economists to define broad increases in prices. Inflation is the rate at which the price of goods and services in an economy increases. Inflation also can be defined ... -
What will happen to my U.S.-based stock portfolio if the U.S. dollar substantially decreases in value?
The effect of a significant depreciation in the value of the U.S. dollar on the value of an investor's U.S-based portfolio is very much a function of the portfolio's contents. In other words, ... -
If a country's currency is determined by the strength of its economy, why isn't the U.S. dollar worth more than the British pound?
Generally speaking, when Country A's currency is worth more than that of Country B, it does not necessarily mean that Country A's economy is stronger than B's. For example, Japan's economy is ... -
The Money Market: A Look Back
Learn how past inflationary periods can predict future real rates of return for cash investments. -
Coping With Inflation Risk
Inflation is less dramatic than a crash, but it can be more devastating to your portfolio. -
Why The Consumer Price Index Is Controversial
Find out why economists are torn about how to calculate inflation.
Free Annual Reports
