Purchasing power
What Purchasing power means in Economics A-Level, as defined for AQA.
Definitions of Purchasing power
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Reference: AQA
What determines for whom goods are produced, since those with higher incomes have a greater incentive and ability to consume.
What real income represents, being nominal income adjusted for inflation, so that a fall means fewer goods can be bought.
During deflation, this increases as goods become cheaper and the same amount of currency buys more goods.
Topics that use Purchasing power
- How markets and prices allocate resources (AQA A-Level)
- Inflation and deflation (AQA A-Level)
- The circular flow of income (AQA A-Level)
Related terms
- Inflation
- Aggregate demand
- Asymmetric information
- Circular flow of income
- Cost-push inflation
- Debt and wealth effects
- Deflation
- Deflationary policies
Using Purchasing power in the exam
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