The purchasing power of money is a characteristic of the monetary unit of any state. It shows how many goods (or services) at the current level of prices and tariffs can be purchased per unit of this currency.
The classical definition of the term "purchasing power" is given in the works of economists: in the famous work of the American mathematician, professor of Yale University (USA) Irving Fisher, who gained world fame, as well as in all encyclopedic, legal, and economic dictionaries. Under the purchasing power of money (currency) is understood the ability of a given monetary unit to be exchanged for a certain amount of goods and services available for sale.
Thus, this characteristic means filling the country's monetary unit with the mass of goods. It is calculated as an index, the value of which is the reciprocal of the price index. It depends on the structure of trade and the value of goods.
The economic dictionary interprets this concept as the ratio of income and price level. That is, with a fixed income, an increase in the prices of goods and services leads to a decrease in the purchasing power of each monetary unit. The same correspondence exists in relation to another economic indicator - the cost of living index.
The purchasing power of any currency is an important indicator for determining the exchange rate. Setting the equivalent rate is impossible without knowing the purchasing power of each currency, that is, the amount of material goods available for purchase in the market of a country for national currency.
Until the 70s of the 20th century, this value was measured in gold. The amount of gold and its value in foreign currency were enshrined in the legislation of each state. For example, for a long time, the price of a dollar was 1/35 of a troy ounce (an international unit of gold weight). The exchange rate was based on a comparison of the gold content in units of different currencies.
Currently, instead of gold, a “consumer basket” is used, that is, a certain set of goods and services. It is clear that in each country the population spends a different amount on the purchase of the same goods, which indicates the different purchasing power of local currencies. In addition, the purchasing power of the population depends on many other factors, the main of which is the ratio between the cost of the “consumer basket” and the real level of wages. It is determined by the number of man-hours of work required to purchase a particular product.
The purchasing power of the Russian ruble, according to experts, falls by 15-25% over the year. The finances included in the state budget to compensate for the costs of inflation have managed to depreciate by the end of the year. Real price and tariff increases are more than double the rate of government funding. Given the constant backlog of salaries, benefits and pensions from the subsistence level, we can talk about a fall in the purchasing power of the ruble by at least 30-35% per year.
Moreover, according to analysts, the cost of goods, services, and with them, respectively, the purchasing power of the ruble in different regions of the Russian Federation can vary significantly (8-16 times). That is, in fact, a solid national currency with a single purchasing power in our country does not exist.
The exchange rate of the ruble, according to the Central Bank, has been supported by at least 70% over the past 15 years due to the export of raw materials (mainly oil and gas) and semi-finished products from it. At the expense of what then is declared economic growth carried out? Due to rising retail prices. In all the constituent entities of the Federation, in most sectors there is a drop in the volume of production and output of marketable products, but rising prices make it possible to talk about an allegedly developing economy.
To restore the balance of "supply-demand" in the commodity-money market, the government needs to pursue a policy of restraining the growth of the money supply and stimulating production (as, for example, in China at the beginning of monetary reforms). In the context of the policy of financial restrictions pursued by our state since 1991, there has been a decrease in production volumes, the share of exports of natural raw materials at dumping prices has risen sharply, which leads to further collapse of the manufacturing sector of the economy.