Question

what is purchasing power of money in terms of cost of living index number.

Answer 1

Answer:

Purchasing power represents the amount of goods and services that $1 will buy. When prices go up that means the purchasing power of money has gone down. Here's an example. An index is a number that starts at 100 in a certain year, which we call the base year.

Explanation:

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.

A cost-of-living index is a theoretical price index that measures relative cost of living over time or regions. It is an index that measures differences in the price of goods and services, and allows for substitutions with other items as prices vary.