Question

Does inflation have anything to do with making a dollar today worth more than a dollar tomorrow?

Short answer

Inflation reduces the purchasing power of money. As a result, this makes today's dollar worth more than a dollar tomorrow.

Step-by-step solution

Meaning of purchasing power of money

Purchasing power refers to money's power, which indicates the value of the number of goods or services that can be availed with a specific sum of money.

Reason for money having time value

The inflation prevailing in an economy increases the prices of goods or services being bought and sold. This leads to a lower quantity of commodities that can be bought today with the given amount of money in comparison to the number of commodities that could have been purchased before inflation. Consequently, inflation reduces the worth of the dollar.