Velocity of Money

Velocity of Money

Calculated as the ratio of quarterly nominal GDP to the quarterly average of M2 money stock, the Federal Reserve Bank of St Louis defines the velocity of money as the frequency with which a unit of currency is used to purchase domestically-produced goods and services within a given time period i.e. the number of times one dollar is spent to buy goods and services per unit of time. A rising velocity of money indicates that more transactions are occurring between individuals.

logo-animationlogo-animationlogo-animation

Related terms