The concept of purchasing power is concerned with:

• A. The ability to buy goods
• B. Investment portfolio diversification
• C. Stock price fluctuations
• D. Interest earned on deposits

Answer: (A)

Purchasing power is about how much money is worth in terms of the goods and services it can buy. It measures the real value of money over time, especially as prices change. When inflation raises prices, the same amount of money buys fewer items, so purchasing power falls; if prices don’t rise, purchasing power stays the same or increases. This concept isn’t about diversifying an investment, how stock prices move, or the interest you earn on deposits—it's specifically about what your money can purchase. So its focus is the ability to buy goods.