What economic issue arises when inflation decreases purchasing power?

The issue that arises when inflation decreases purchasing power is primarily concerned with how inflation, when it outpaces wage growth, erodes the value of money and what consumers can afford. Although economic growth generally refers to an increase in the production of goods and services, it doesn't directly address the immediate problem of diminishing purchasing power due to inflation.

Decreased purchasing power means that consumers are unable to buy as much with the same amount of money, leading to a situation where people may struggle to maintain their standard of living. The answer choice indicating economic growth does not capture the negative impact inflation has on purchasing power; rather, it suggests a broader, more positive economic condition that may not be present in a scenario where inflation is problematic.

In contrast, the other answer choices appropriately relate to the complications that can ensue due to inflation, like stagflation—a situation of stagnant economic growth with high inflation—deflationary spirals—a concerning trend of decreasing prices leading to further economic decline—and increased wages, which could be a response to inflation but does not inherently address the issue of decreased purchasing power. Therefore, it is essential to recognize that while economic growth is beneficial, it does not directly resolve the challenges posed by inflation on purchasing power.