Velocity of Money - Indirect Measurement

Indirect Measurement

In practice, attempts to measure the velocity of money are usually indirect:

where

is the velocity of money for all transactions.
is the nominal value of aggregate transactions.
is the total amount of money in circulation on average in the economy (see “Money supply” for details).

(Given the classical dichotomy, may be factored into a product of a price level and a 'real' aggregate value of transactions .)

Values of and permit calculation of .

As applied to an economy, expenditures on final output are of interest; the relation may be written:

where

is the velocity for transactions counting towards national or domestic product.
is nominal national or domestic product.

(Analogously with, given the classical dichotomy, may be factored into a product .)

  • Velocity of M1 Money Stock in the US 1959–2012

  • Velocity of M2 Money Stock in the US 1959–2012

  • Velocity of MZM Money Stock in the US 1959–2012

Read more about this topic:  Velocity Of Money

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