Purchasing power is a factor referred to in deterimning the cost of living which determines the strength of the dollar for the purchasing of goods and services. Inflationary forces decrease purchasing power because of the devaluation of currency.
In currency comparisons, Purchasing Power Parities (PPPs) are currency conversion rates that both convert to a common currency and equalize the purchasing power of different currencies. PPPs eliminate the differences in price levels between countries in the process of conversion. PPP exchange rates are used in international comparisons of standard of living. They calculate the relative value of currencies based on what those currencies will buy in their nation of origin.
To calculate the purchasing power of the dollar in a particular year compared to other years, visit:
http://www.eh.net/hmit/ppowerusd/
