Question

Your grandmother tells you a dollar doesn’t go as far as it used to. She says the “purchasing power” of a dollar is much less than it used to be. Explain what she means. Try to use and explain terms like inflation and deflation in your answer.

Answer 1

Well, you could say that the purchasing power of a dollar is much less because more money is made and causes the worth of the dollar bill to decrease, making things more expensive. This is called inflation. However, when less money is made, the worth of a dollar bill increases, and things become less expensive. this is called deflation