Purchasing Power

1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase.

2. In investment terms, the dollar amount of credit available to a customer to buy additional securities against the existing marginable securities in the brokerage account.

1. To measure purchasing power, you'd compare against price index such as CPI. A simple way to think about purchasing power is to imagine if you made the same salary as your grandfather. Clearly you could survive on much less a few generations ago, however, because of inflation, you'd need a greater salary just to maintain the same quality of living.

2. Each jurisdiction has its own rules governing margin transactions. In the United States you can purchase up to 50% of securities on margin, so, if you had $10,000 in a margin account, you'd be able to purchase up to $20,000 worth of securities. Said another way, you have an extra $10,000 of purchasing power (buying power).


Investment dictionary. . 2012.

Look at other dictionaries:

  • Purchasing power — is the amount of value of a good/services compared to the amount paid with a currency. Currency can be either a commodity money, like gold or silver, or fiat currency like US dollars which are the world reserve currency. As Adam Smith noted,… …   Wikipedia

  • purchasing power — purchasing .power n [U] 1.) the amount of money that a person or group has available to spend ▪ increases in purchasing power 2.) the amount that a unit of money can buy ▪ The purchasing power of the local currency has halved …   Dictionary of contemporary English

  • purchasing power — The amount of credit available for securities trading in a margin account, after taking margin requirements into consideration. Bloomberg Financial Dictionary A settlement bank s cash position in Central Bank money and its collateral value of… …   Financial and business terms

  • purchasing power — 1) N UNCOUNT The purchasing power of a currency is the amount of goods or services that you can buy with it. The real purchasing power of the rouble has plummeted. 2) N UNCOUNT The purchasing power of a person or group of people is the amount of… …   English dictionary

  • purchasing power — The ability to purchase goods and services. In times of inflation a loss of purchasing power occurs when monetary assets are held because of the decline in the purchasing power of the currency. If a company has monetary liabilities, a purchasing… …   Accounting dictionary

  • purchasing power — The ability to purchase goods and services. In times of inflation a loss of purchasing power occurs when monetary assets are held because of the decline in the purchasing power of the currency. If a company has monetary liabilities, a purchasing… …   Big dictionary of business and management

  • purchasing power — pur|chas|ing pow|er [ pɜrtʃəsıŋ ,paur ] noun uncount FORMAL 1. ) the ability of people to buy goods and services, usually based on how much they earn and save: The purchasing power of teenagers has increased enormously. 2. ) the value of a… …   Usage of the words and phrases in modern English

  • purchasing power — noun (U) 1 the amount of money that a person or group has available to spend compared to other people: Widespread wage rises result in increased purchasing power. 2 the value of a unit of money considered in terms of how much you can buy with it …   Longman dictionary of contemporary English

  • purchasing power — UK [ˈpɜː(r)tʃəsɪŋ ˌpaʊə(r)] / US [ˈpɜrtʃəsɪŋ ˌpaʊr] noun [uncountable] formal 1) the ability of people to buy goods and services, usually based on how much they earn and save The purchasing power of teenagers has increased enormously. 2) the… …   English dictionary

  • purchasing power — / pɜ:tʃɪsɪŋ ˌpaυə/ noun the quantity of goods which can be bought by a particular group of people or with a particular sum of money ● the purchasing power of the school market ● The purchasing power of the pound has fallen over the last five… …   Dictionary of banking and finance

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