Question

your grandma tells you a dollar doesn’t go as far as it used to. She says the “purchasing power” of a folla 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

Yeah the granny's right in her own way.

Step-by-step explanation:

Due to inflation, which means the rise in price of goods and services, the amount that one can buy for their money; known as, "buy for money", and "purchasing power" has reduced. This phenomenon shows that when the price goes up, the quantity that can be purchased for the same price goes down.

This is an interesting relationship between inflation and deflation like mentioned above . Less buy for money (per dollar) during inflation (of price) and vice versa during deflation.

Answer 2

See below

Step-by-step explanation:

Grandma is referring to the effects of inflation in the economy. Inflation is the general increase in prices in the economy over a period. As the economy grows, prices of consumer goods and services tend to increase. A fast economic growth rate is likely to cause a sharp increase in the inflation rate, which increases the prices of goods and services.

An increase in price means that one dollar will buy fewer quantities of a product or service than before. In other words, one will require more money today than they did previously to purchase the same amount of goods and services. Therefore, inflation, or an increase in prices, diminishes the dollar's purchasing power or that of any other currency.

Deflation is the opposite of inflation. It means a decline in prices in an economy over time. Deflation results in an increase in the purchasing power of a currency.