velocity of circulation

a measure of the average number of times each MONEY unit is used to purchase the year's output of final goods and services (GROSS DOMESTIC POLICY). If, for example, the total value of final output is £100 billion and the total MONEY SUPPLY is £10 billion, then, on average, each £1 unit has changed hands ten times.

There is some controversy between the monetarist proponents of the QUANTITY THEORY OF MONEY and Keynesian economists about the stability of the velocity of circulation of money. Monetarists (see MONETARISM) hold that the velocity of circulation is stable or changes only slowly over time and so argue that there is a direct link between the money supply and the price level, and the rate of growth of money supply and rate of INFLATION. Keynesian economists (see KEYNESIAN ECONOMICS) argue that the velocity of circulation is unstable and that it can change rapidly, offsetting any changes in the money supply.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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References in periodicals archive

With the increase in interest rates depicted in figure 1, figure 11 shows that the inverse of the velocity of circulation of currency given by equation 10 decreases quite significantly (instead of remaining constant as in the FKS experiment).

A monetarist view of the Fed's balance sheet normalization period

Like a coin the value of a single policeman is increased by the velocity of circulation. Mostly, a single policeman or a posse of them is stock at a point like a lamp post.

Delhi's Shame

The composition of superficial water depends on its interaction with the rock substrate of the hydrologic basin, the soil (non saturated zone) and its velocity of circulation. Processes involved in soil development and soil composition in a specified zone have a significant impact on water composition too.

Water mineralization origin inferred from the rainfall contribution. Relationship between quality of water, soil and lithology

285) attributes the MV and DU notation to John Pease Norton's Statistical Studies in the New York Money Market (1902), without mentioning the earlier appearance of that equation and notation in Fisher (1897)--or mentioning that Norton (1902) was a Yale doctoral dissertation by one of Fisher's students and junior colleagues, who repeatedly cited Fisher on velocity of circulation (Norton 1902, pp.

Irving Fisher's The Purchasing Power of Money

(8) Another deficiency of the quantity theory of money is that it resorts to the so-called "velocity of circulation;" a black box used ad hoc to explain price changes unexplainable via quantity changes.

The quality of money

Inflation will not be a problem next year but beyond that timeframe it could well return as a recovery sets in and the velocity of circulation picks up.

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In the next section (Section II) we present the increase or decrease of money supply effected by this monetary authority in the traditional structure of analysis, and then we examine the efficacy of the controlling and regulating power of the Fed when we factor in velocity of circulation of money in the electronic transaction conduits.

Efficiency of the federal reserve under globalization and presence of electronic transactions