Velocity of Money: Definition, Formula, and Examples
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Velocity of Money: Definition, Formula, and Examples
The velocity of money is a measurement of the rate at which consumers and businesses exchange money in an economy.
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The velocity of money, V, is defined as the ratio of real GNP to real money holdings, V=Y /(M / P) in this chapter's notation. Use equation (14-4) to derive an expression for velocity and explain how velocity varies with changes in R and in Y. (Hint: The effect of output changes on V depends on the elasticity of aggregate money demand with respect to real output, which economists believe to be less than unity.) What is the relationship between velocity and the exchange rate? | Numerade
The velocity of money, V, is defined as the ratio of real GNP to real money holdings, V=Y /(M / P) in this chapter's notation. Use equation (14-4) to derive an expression for velocity and explain how velocity varies with changes in R and in Y. (Hint: The effect of output changes on V depends on the elasticity of aggregate money demand with respect to real output, which economists believe to be less than unity.) What is the relationship between velocity and the exchange rate? | Numerade
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The velocity of money, V, is defined as the ratio of real GNP to real money holdings, V=Y /(M / P) in this chapter's notation. Use equation (14-4) to derive an expression for velocity and explain how velocity varies with changes in R and in Y. (Hint: The effect of output changes on V depends on the elasticity of aggregate money demand with respect to real output, which economists believe to be less than unity.) What is the relationship between velocity and the exchange rate? | Numerade
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