Purchasing power is best defined as?

• A. The ability to schedule tasks
• B. The ability to purchase goods and services
• C. The measure of a business's history
• D. The concept of profitability

Answer: (B)

Purchasing power is the amount of goods and services you can buy with a given amount of money. It reflects money’s value in terms of what it can purchase. When prices rise (inflation) and your income stays the same, your purchasing power falls because you can buy less. If incomes rise or prices fall, purchasing power increases, since you can buy more with the same money. The concept isn’t about scheduling tasks, a business’s history, or profitability—those describe other ideas. So the best definition is the ability to purchase goods and services.