What economic concept refers to a decrease in the purchasing power of money due to rising prices?

The economic concept that refers to a decrease in the purchasing power of money due to rising prices is inflation. When inflation occurs, the general price levels of goods and services increase over time, meaning that for the same amount of money, consumers can buy fewer goods than they could before. This erosion of purchasing power can be caused by various factors, including increased demand for products, higher production costs, or expansionary monetary policies.

In contrast, deflation is characterized by falling prices, which typically increases purchasing power. Stagnation refers to a prolonged period of little or no economic growth and does not necessarily involve changes in price levels. A recession is defined as a significant decline in economic activity that can involve reduced consumer spending and higher unemployment, but it is not directly tied to the concept of price levels rising as inflation is. Thus, inflation is specifically the term that captures the scenario of decreasing purchasing power through rising prices.