purchasing power

Purchasing power

The amount of credit available for securities trading in a margin account, after taking margin requirements into consideration.

Purchasing Power

1. The value of a currency expressed as the amount of goods or services one unit of the currency can buy. Purchasing power is important to inflation, as the higher an inflation rate is, the fewer goods and services one unit of a currency can buy. To measure purchasing power, one must compare it with an objective standard; that is, one might compare how much one dollar can buy now versus how much it could buy 10 year ago. See also: CPI, Purchasing power parity.

2. The dollar amount of securities one can buy on a margin account. Different jurisdictions have different rules on how to measure purchasing power.

purchasing power

1. Consumer ability to purchase goods and services. Increased purchasing power represents proportionately larger increases in income than increases in the cost of goods and services.

2. The ability to purchase goods and services with a fixed amount of money. Within this narrower application, purchasing power is inversely related to the consumer price index. Increased purchasing power is a signal that future increases in economic activity are likely.

purchasing power

the amount of goods and services which can be purchased by a specified sum of money, given the prices of those goods and services. The greater the quantity of products which can be bought with, say, £20, the greater is the purchasing power of that sum of money. If prices go up (INFLATION), however, then purchasing power will fall. What is important for people and business is the long-run relationship of prices and the amount of money they have available to spend. If prices double, for example, but because people's wages are INDEX-LINKED, (i.e. related to a PRICE INDEX), wages also double, then purchasing power remains unchanged.

purchasing power

the extent to which a given monetary unit can buy goods and services. The greater the amount of goods and services purchased with, say, £10, the greater is its purchasing power. Purchasing power is directly linked to the RETAIL PRICE INDEX and can be used to compare the material wealth of an average individual from a previous time period with the present. See INFLATION, PURCHASING-POWER PARITY THEORY.