The Purchasing Power of the Dollar


money
The money income of the family have been considered--its source, its control, its adequacy, its security. The welfare of the family is conditioned by all these factors, but there remains to be considered another set of forces equally important. The money income of the family is but a means to an end. It must be turned into real income by expenditure before the family has the satisfactions that are the end of its economic endeavors. It is to this complementary process of spending as opposed to earning to which we must now turn our attention. The conditions which determine the expenditure of money incomes and the satisfactions derived therefrom constitute the third major group of economic problems of the family, the first of which centered around the utilization of the time, energy and abilities of its members in direct production, and the second around the acquisition of a money income.
The first hard fact to be taken into account after the money income is earned and is ready to be converted into desired goods and services is that each good and service has its price. The possession of each will necessitate giving up a certain proportion of the purchasing power available and thereby make impossible the possession of some other good. Some goods can only be had at a high price; others at a relatively low one. But all have their price tags or quotations which indicate to the buyer the terms upon which they can be acquired.
The purchasing power of his dollar as measured by the market prices of the goods he desires is therefore of great significance to the buyer. He is better off both when his income in dollars goes up and when prices go down, that is to say, when he can get more of a given article for each dollar. It is obvious then that the family's real income is dependent not only upon the efficiency of its members in direct production and upon the amount of its money income but upon the purchasing power of the pecuniary unit, upon the level of prices at the time and in the place where it lives.
In the analysis of the factors affecting the purchasing power of the "dollar of the home" it is highly important to differentiate between "general" and "specific" purchasing power. They present altogether different economic problems. By the "general purchasing power" of the dollar is meant its command over consumers' goods and services in general as compared with an earlier time or another place. The family may find its command over goods of practically every kind shrinking. The general price level in other words may be rising. Food, clothing, shelter, incidentals--all may cost more. By "specific purchasing power" of the dollar is meant its command over particular goods, over oranges, milk, infants' shoes, men's hats, services of a laundress, books, or trolley rides. Prices of particular goods change, giving the consumer more or less for a dollar. Here is a problem entirely different from that of shifts in the prices of goods in general.

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