What concept describes the idea that money gains or loses value over time?

The correct concept that describes the idea that money gains or loses value over time is known as the time value of money. This principle reflects the notion that a specific amount of money today is worth more than the same amount in the future due to its potential earning capacity. The time value of money is based on the premise that money can earn interest or generate returns when invested, meaning that a dollar received today can grow into a larger sum over time. Consequently, this concept emphasizes the importance of considering the timing of cash flows in financial decisions and investments.

Understanding the time value of money is essential in real estate appraisal and investment, as appraisers and investors must analyze future cash flows from properties and compare them to current investments, making informed decisions about real estate transactions.