Purchasing power
Description:
Investopedia.com: "The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy." At times of high inflation, cash is worth less on the market, meaning that a loaf of bread will cost the same based on value, but measured in cash it is more expensive. If something costs 2 euros, but there is a time of hyperinflation, you would need, say, 2000 euros for that same loaf of bread. Inflation is that which decreases the purchasing power of money; it is this that allowed you to buy a load of bread for 10 cents a few decades ago. In order to purchase goods not necessary for survival, a currency needs to be strong and a person needs to be employed with a good salary.
Enablers:
- Increased inflation
- Interest rates
- (Un)employment rate
- Consumer Price Index
Inhibitors:
- Decreased inflation
- Industry economy
- High import/export ratio
Paradigms:
Old: (Pre-Euro times) Trading within and with Europe is tedious and difficult. The purchasing power of individual nations differs greatly within Europe. Residents of countries with strong currencies such as the Netherlands, Sweden, Finland and England have high purchasing power and are able to spend on excess goods. Other European countries have lower wages, higher unemployment, and lower purchasing power.
New: (Post-Euro times) A stronger united Euro currency allowed nations within Europe to strive to adhere to Euro regulations, in order to become members. Higher employment followed, no loss on exchange rates, easier business with Euro-countries by the United States and the oriental business centers. More purchasing power in some nations, some years. More credit buys. Higher expenditure on goods.
Experts:
Timing:
Web Resources:
Investopedia Purchasing power
The Concise Encyclopedia of Economics: Inflation by David Ranson
[http://www.tnr.com/doc.mhtml?i=20020211&s=judis021102 Don't be afraid of the euro: by John B. Judis
CBS the Netherlands on Purchasing power in 2004
Purchasing power parity and the euro area