What economic phenomenon declines the purchasing power of money?

Inflation is the economic phenomenon that leads to a decline in the purchasing power of money. When inflation occurs, the general level of prices for goods and services rises, which means that each unit of currency buys fewer goods and services than it did before. This erosion of purchasing power is a crucial concept in economics as it affects consumer behavior, savings, investments, and overall economic stability.

In contrast, expenses refer to costs incurred, which do not inherently impact the value of money itself. A boom describes an economic period of growth and increased spending, potentially leading to increased inflation, but it is not an inherent decline in purchasing power. Deflation, on the other hand, is the reduction of the general price level of goods and services, which would actually increase the purchasing power of money. Therefore, inflation specifically denotes the phenomenon that diminishes the purchasing power, highlighting its significance in economic discussions and financial planning.