Velocity of Money
Velocity of money is a measure of how quickly money is exchanged in an economy. It is calculated by dividing the total amount of money exchanged in a given period of time by the total amount of money in circulation. The velocity of money is an important indicator of economic activity, as it shows how quickly money is being used to purchase goods and services. It is also used to measure the effectiveness of monetary policy, as it shows how quickly money is being circulated in the economy.
History of the Term
The concept of velocity of money was first introduced by economist Irving Fisher in the early 1900s. Fisher argued that the velocity of money was an important factor in determining the level of economic activity. He argued that if the velocity of money was too low, then economic activity would be sluggish, and if it was too high, then inflation would result. Since then, the velocity of money has been used as an important indicator of economic activity.
Comparison Table
| Year | Velocity of Money |
|---|---|
| 2020 | 1.3 |
| 2019 | 1.4 |
| 2018 | 1.5 |
Summary
Velocity of money is an important indicator of economic activity, as it shows how quickly money is being used to purchase goods and services. It is calculated by dividing the total amount of money exchanged in a given period of time by the total amount of money in circulation. For more information on the velocity of money, you can visit the websites of the Federal Reserve Bank of St. Louis, the Federal Reserve Bank of New York, and the International Monetary Fund.
See Also
- Money Supply
- Inflation
- Interest Rates
- Gross Domestic Product
- Monetary Policy
- Exchange Rates
- Balance of Payments
- Money Multiplier
- Real GDP
- GDP Deflator
