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When Jonathan is earning 2% on an investment but inflation is increasing by 3%, his purchasing power is actually decreasing. Let me explain why:
1. Earning 2% on an investment means Jonathan is gaining a return on his money, which seems positive.
2. However, with inflation at 3%, the general price level of goods and services is increasing.
3. Since inflation is outpacing his investment return, Jonathan's purchasing power is eroded. This means that even though he is earning money on his investment, the increasing prices due to inflation make each dollar he has worth less in terms of what he can buy.
So, in this case, Jonathan's purchasing power is decreasing due to the impact of inflation outstripping the return on his investment.
