Answer to Question #310409 in Finance for Ana

Question

Using data from the Economic Report of the President, calculate velocity For the M2 definie of the money fupply in the past five years Does velocity appear to be constant

Answer 1

$\frac{M2}{ H} = \frac{(C + D)}{ (C + R)}=\frac{ (\frac{C}{D} + 1)}{(\frac{C}{D} + \frac{R}{D})}$

where M2 is the money supply in circulation;

H is the monetary base;

C - cash;

D - deposits;

R - required reserves of commercial banks.