YES! Domestic money's purchasing power is quite related to inflation. In fact, the origin of the consumer price index was to gauge the purchasing power of one unit of domestic money (remember the usual conditions for consumer optimization from microeconomics).
What do you mean? Inflation and purchasing power relationship goes without saying. Inflation and purchasing power PARITY relationship it's a different story.
OK Andrea. You are right, but the question here did not mention anything about PARITY. It's then very specific to my answer. Now, if you want to include that issue to the discussion, on behalf of Ali-Mohammed, the discussion should mention the differences between absolute "purchasing power parity" (PPP) and relative PPP. It should also include all the assumptions maintained behind those two concepts. Should we do it after Ali-Mohammed reformulates his question?
Inflation reduces a currency's purchasing power and what that currency can buy. Loss of purchasing power has the effect of an increase in prices. To measure purchasing power in the traditional economic sense, you could compare the price of a good or service against a price index such as the Consumer Price Index (CPI).
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