The purchasing power of money indicates the amount of goods that can be purchased with a given amount of money. However, prices of goods fluctuate and often change. Purchasing power can also be described as the ability of households and market participants to generate effective demand on the (consumer) goods, commodities or services market. Inflation (depreciation of money) and deflation (appreciation of money) affect the purchasing power of money. For example, heating oil becomes more expensive in winter, while other goods such as bicycles or computers become cheaper in the same period.
