Answer to Question #110420 in Macroeconomics for sarai

Question

In a large economy such as ours, it is impossible to simply count how many times each dollar changes hands (velocity). H ow do we calculate V?

Answer 1

Velocity of money or dollar is calculated by dividing the gross domestic product (GDP) of an economy by the money supply.

Thus, $V = \frac {GDP}{Money supply}$