Final answer:
In a scenario where the general inflation rate has averaged 4% per year, the purchasing power of $1000 in an account would decrease over 6 years. This is because inflation reduces how much can be bought with a given sum of money as prices of goods and services generally rise.
Step-by-step explanation:
If the general inflation rate has averaged 4% per year over the last 6 years, the value of 1000 in an account now would theoretically have the same purchasing power as it did 6 years ago. This implies that purchasing power has decreased. The calculation for determining the change in purchasing power is to look at the percentage change in the cost of purchasing an overall basket of goods at different time periods. As inflation causes prices of goods and services to increase, the amount of goods that can be bought with $1000 diminishes over time.
Inflation doesn't just mean that prices increase; it also signifies that each unit of currency buys fewer goods and services. Hence, even without touching the funds, the purchasing power of a sum of money like $1000 will decrease with time if the inflation rate is positive, as it means the cost of goods has increased.
If your income or the balance in your account doesn't grow at least at the inflation rate, you are effectively becoming 'poorer' because what you can buy with that money becomes less and less over time. For example, if a shirt costs $20 now, with a 4% annual inflation rate, it would likely cost around $20.80 the next year. So the correct answer is that the purchasing power has decreased, given by option b).