Velocity of money

Rate of money changing hands

The velocity of money measures the number of times that one unit of currency is used to purchase goods and services within a given time period. In other words, it's how many times money is changing hands. The concept relates the size of economic activity to a given money supply, and the speed of money exchange is one of the variables that determine inflation. The measure of the velocity of money is usually the ratio of the gross national product (GNP) to a country's money supply.

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