Buying Power Calculator

The buying power calculator computes the equivalent ($) dollar value of any amount relative to the reference year.

What is Buying Power?

“Buying power is the value of the currency in terms of purchasing of goods and services” 

In terms of investments, purchasing power describes the amount of money available for investors to purchase securities to their advantage. 

The value of the currency varies from year to year. An effective purchasing power calculator is necessary to know the actual liquidity of cash of a business in a specific year. 

Factors Affecting Buying Power?

Factors affecting the buying power are.

• Changes in Price
• Inflation and Deflation
• Employment and Real Income
• Currency Exchange
• Availability of Credit and Interest Rates
• Supply and Demand
• Tax Rates

How to Calculate Purchasing Power?

The purchasing power formula is:

Year 2 Price = Year 1 Price x (Year 2 CPI/Year 1 CPI)

The Purchasing Power Calculator lets you find how inflation alters the purchasing power of individuals and companies

Practical Example:

Calculate buying power of the values of $ 1000 in 2023 compared to 2000.

Given:

Amount = $ 1000

Target year = 2023 

Reference year = 2000

Buying power =?

Solution:

The buying power formula is:

Year 2 Price = Year 1 Price x (Year 2 CPI/Year 1 CPI)

Buying power = $ 1000 × (251.107 / 172.2) 

Buying power = $ 1000 × (251.107 / 172.2) 

Buying power = $ 1000 × (1.46) 

Buying power = $ 1460 

Now $ 1460 is the value of $ 1000 in 2000 calculated by the online dollar buying power calculator.

Working of Buying Power Calculator:

The spending power calculator calculation can be done by following the symmetry of the steps:

Let’s see how!

 Input:

• Enter the desired amount 
• Enter reference year and target year
• Tap calculate

Output:

• Dollar values of money

FAQs:

How Much Buying Power Do I Have as a Consumer?

A consumer’s buying power represents his or her ability to make purchases. For example, if prices decline, consumers have greater buying power. If the value of the dollar increases relative to foreign currency, consumers have greater buying power.

What is the Difference Between Purchasing Power and Buying Power?

Consumer buying power refers to whats my buying power is to spend. On the contrary consumer purchasing power refers to how far that money will go.

The US Price Index Table:

The consumer price index for the US from 2000 to 2023 is described in the table below:

You can check and confirm all the data by the online buying power calculator.

References:

From the source of investopedia.com: Buying power 

From the source of minneapolisfed.org: Consumer price index