What is an economic consequence of inflation on purchasing power?

Inflation is defined as the rate at which the general level of prices for goods and services rises, eroding purchasing power. When inflation occurs, each unit of currency buys fewer goods and services than it did previously, meaning that for consumers, their ability to purchase items diminishes. This is why purchasing power decreases during periods of inflation.

For example, if the inflation rate is 3%, the cost of goods will rise overall, and consumers will need more money to buy the same items they could have purchased for less in the past. This reduced capacity to buy the same level of goods and services is what defines a decrease in purchasing power. Therefore, the economic consequence of inflation is directly related to a decline in the amount of goods and services that consumers can afford, highlighting why this answer is the most accurate representation of the relationship between inflation and purchasing power.