Buying Power

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Definition of 'Buying Power'

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Buying power is the amount of goods and services that can be purchased with a given amount of money. It is calculated by dividing the amount of money available by the price of the goods or services. For example, if you have $100 and the price of a loaf of bread is $5, then your buying power is 20 loaves of bread.

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Buying power can be affected by a number of factors, including inflation, interest rates, and the exchange rate. Inflation is the rate at which prices increase over time, and it can erode buying power by making goods and services more expensive. Interest rates can also affect buying power, as they can make it more or less expensive to borrow money. The exchange rate is the rate at which one currency can be exchanged for another, and it can affect the price of goods and services that are imported or exported.

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Buying power is an important concept for understanding the economy and how it affects your personal finances. It is also a key factor in determining your financial well-being, as it can affect your ability to afford the things you need and want.

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