Purchasing power of currency
The purchasing power of currency is the quantity of goods and services that can be bought with a monetary unit. Because of rising prices, the purchasing power of currency deteriorates over time. Outside of the country, it drops in cases of depreciation and devaluation and increases with the opposite. To observe the real trend in economic activity (production, consumption, etc.) account must therefore be taken of the effects of inflation. A distinction is thus made between trends at current prices (without any correction for the inflation effect) and trends at constant prices (with correction for inflation). In the first case, the change is given in value and in the second case in volume. To approximate inflation (or deflation) the consumer price index is in general used.
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