What is a common effect of inflation on purchasing power?

Purchasing power is the quantity of goods and services that a given amount of money can buy. Inflation is a sustained rise in the general price level of an economy. Because a fixed sum of money commands fewer goods and services when prices are generally higher, the general price level and the real value of money move in opposite directions.

Applying this to the question: when the general price level rises persistently (inflation), the same rupee amount buys less than it used to, so the real value -- the purchasing power -- of a fixed sum of money falls as inflation continues.

Comparing this against each offered description:

• A rise in the value of money commanding more goods and services would require the general price level to fall (deflation) or the currency to strengthen -- the reverse price-level direction from sustained inflation.

• A fall in the real value of a fixed sum of money, so it buys fewer goods and services, is the direction of change produced when the general price level rises.

• Purchasing power staying exactly the same over time would require the general price level to remain stable, not to rise persistently.

• A rise in the amount of money set aside for future use is a savings decision made by individuals and is independent of whether a fixed sum currently buys more or less in the market.

So the description of a fall in the real value of money as prices rise is the outcome that matches a sustained general price-level increase.