Question

Inflation is defined as a rise in the general level of prices. When inflation occurs, the buying power of the dollar would:

Answer 1

Answer: the buying power of the dollar would: decrease.

Explanation:

Purchasing power means the amount of goods that can be bought with the given unit of money. The value of the dollar decreases when there is an inflation. Inflation reduces money value by raising the prices of the goods and services in the country.

Purchasing power can be compared with the salaries received 50 years ago and current salaries. Though the current salaries have increased the prices of the goods have also increased accordingly. Which can also be termed as increased cost of living.