We can think of inflation occurring over time as a type of discounting process where the present value of a sum today is diminished by reverse compounding over time.

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Inflation reduces the buying power of money over time, so the amount of money required to buy the same goods and services increases. This can be thought of as a discounting process where the present value of a sum today is diminished by the effects of inflation over time. Reverse compounding refers to the fact that the present value of a sum decreases over time due to inflation, whereas compounding refers to the fact that the future value of a sum increases over time when it earns interest or other investment returns.

We Can Think of Inflation Occurring Over Time as a Type