What can be an effect of decreased purchasing power?

Decreased purchasing power means that consumers have less ability to buy goods and services because their money does not stretch as far as it once did. This could be due to inflation, where prices rise but wages do not increase at the same rate, or any economic downturn that impacts income. As purchasing power declines, consumers find it more challenging to afford the same quantity or quality of goods and services they could have previously, leading to a direct reduction in overall consumption.

This situation can affect consumer behavior, influencing choices toward more affordable options or causing postponement of purchases altogether. The other options suggest outcomes that are generally opposite to what diminished purchasing power typically leads to; for instance, increased savings or higher confidence do not reflect the strained financial situations consumers may face when they have limited means to purchase what they need.