What Is Purchasing Power?

- Purchasing power is the value

of a currency expressed in terms of
the number of goods or services that
one unit of money can buy. It can
weaken over time due to inflation.
That's because rising prices
effectively decrease the number of
goods or services you can buy.
 Contemporary issues in economics
vary from nation to nation, but every
country wrestles to varying degrees with
climate change, political scenarios,
technology and even the human element
behind both labor and consumer spending.
Migration
Fluctuation in exchange rate
Unemployment
Oil price increases
 MIGRATION
- Economic migration is the
movement of people from one country
to another to benefit from greater
economic opportunities in the
receiving country.
How does the migration affects
the purchasing power of the
people?
Income from remittances provides opportunities for
Filipino to allow children a better education, health
care and livings standards.

Migrants in general send remittances home to their

families; if these are spent on setting up a business,
this can generate employment. On the other hand,
receiving remittances can increase the household
reservation wage,1 altering the need for household
members to be in work.
What causes fluctuations in
exchange rates?

Exchange rates are constantly

moving, based on supply and demand.
Whether one currency is in higher
demand than another, depends on the
perceived value of owning it,
either to pay for goods and
services, or as an investment.
How does the fluctuation in exchange
rate affects the purchasing power of
the people?
First, a fluctuating currency causes inflation
which lessens purchasing power. Second, there are
commodities that the Philippines buy abroad, and
dollars are needed to purchase those goods. Now that
it takes more dollars to buy these goods expect a
price increase.

Fluctuating exchange rates affect purchasing

power in relation to other currencies. As one
nation's currency devalues against another, goods in
the second country will be higher in the first
country's currency.
 The term unemployment
refers to a situation where
a person actively searches
for employment but is unable
to find work.
What is the effect of unemployment
in the purchasing power of the
people?
Since what one spends is what another earns and
one is unemployed, he has lower purchasing power and
would also prefer to save more as one is likely to be
uncertain of the future. When a large number of people
are unemployed, collectively, their expenditure would be
much lower.

The unemployed are also unable to purchase as many

goods, so will contribute to lower spending and lower
output. A rise in unemployment can cause a negative
multiplier effect. Increase in social problems.
What makes the oil price
increases?
The price of oil fluctuates
according to three main factors:
current supply, future supply, and
expected global demand.
How does oil price increase
affect purchasing power of
consumers?

Price increases reduce the

purchasing power of money that
in turn has an adverse impact
on consumers' welfare.