What is the impact of credit on purchasing power?

The correct choice indicates that credit can indeed increase purchasing power, as it enables individuals to make purchases they might not be able to afford upfront. When consumers are given access to credit, they can buy goods and services immediately while deferring payment to a later date. This facility allows them to manage their finances more flexibly, enabling expenditures that align with their needs or desires without waiting to save the full amount in advance.

For example, using credit cards or loans, individuals can finance significant purchases like cars or home appliances, which would otherwise be difficult to acquire from personal savings alone. This immediate access to funds can enhance their standard of living and facilitate larger purchases for essential items, contributing positively to consumer demand in the economy.

This perspective clarifies why the other options do not align with the dynamics of credit and purchasing power. While certain situations may arise where credit could lead to increased expenses or high-interest rates that burden consumers, the fundamental role of credit primarily serves to enhance purchasing potential by offering instant access to funds, thus promoting economic activity and retail sales.