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Does encoding a low bit rate (say 128 kbps) Mp3 from a 320 kbps Mp3 produce the same thing as encoding it from the original lossless? Or does the way Mp3 work mean that the losses compound on each other?

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You wouldn't get the same result as you would if encoding from the original source. The losses do compound. But 320 kbps is high enough that a one-generation-removed re-encode to 128 kbps would be perceptually acceptable.

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