Purchasing power risk, also known as inflation risk, occurs when inflation reduces the real value of a fixed-income stream. Fixed payments (e.g., bond interest or annuity payments) lose buying power as inflation rises.

D is correct because inflation directly affects fixed income by eroding purchasing power.

A is incorrect because market risk relates to fluctuations in market prices, not inflation.

B is incorrect because economic risk generally refers to broader economic downturns.

C is incorrect because interest rate risk involves changes in bond prices due to interest rate movements, not inflation.