Velocity of Money Circulation

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• Velocity of money

  M is the stock of money, V is the VELOCITY OF CIRCULATION, P is the average PRICE level and T is the number of transactions in the economy. The equation states that the quantity of money spent equals the quantity of money used.

• Growth rate of money

  growth rate of money With Constant velocity of circulation growth rate of money = inflation rate + real GDP growth rate or growth rate of money = 5% + 3% = 8% Answer: growth rate of money = 8% growth rate of nominal GDP

• Velocity of Money

  Introduction- The velocity of circulation of money(Vm) is the number of times a unit of money changes hands during exchanges in a year.

• Economic growth

  The equation for the velocity of circulation is therefore: V = Y / M where M is money stock in economy, Y income velocity of circulation and V average velocity of circulation. So we have V = 7.5 / 3 = 2.5 9.

• quantity theory of money

  166449 quantity theory of money Suppose that the quantity of money in circulation is fixed but the income of velocity of money doubles. If the real GDP remains at its long run potential level, what happens to the equilibrium price level?

• Price Level and GDP

  In year 1, real GDP was $400 million, the price level was 200, and the velocity of circulation was 20. In year 2, the quantity of money was 20 percent higher than in year 1.

• Velocity of money

  Hence there can be reduction in money supply with increase in the number of time of circulation of money due to advancement in technology. This solution describes the concept of velocity of money.

• Contemporary economic issues

  The velocity of money can be calculated as: Velocity of money = nominal value of aggregate transactions/ total amount of money in circulation, in an economy.

• Topics of Great Depression

  Then we may deduce the following chain of consequences in nine links 1. Debt liquidation leads to distress selling and to 2. Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation.