when the quality of a good improves the purchasing power of the dollar?
Most modern paper currencies, such as the US dollar, are traded against each other and commodity money in the secondary market for the purpose of international transfer to pay for goods and services. As Adam Smith pointed out, having money gives one the ability to “lead” the economics of others’ labor, so purchasing power is to some extent power over others, to the point where some are willing to risk their labor or goods for money or currency.
If the per capita monetary income remains the same with the rise in the average standard of living, this means that the purchasing power of this income decreases. Economic inflation does not always mean a decrease in the purchasing power of an individual’s money income, because an individual’s income may rise faster than the price level. Higher real income means higher purchasing power. Because real income refers to income adjusted for inflation.