Answer to Question #256884 in Macroeconomics for Shubhi

Question

Describe with an example the various factors that determine the velocity of circulation of money in an economy

Answer 1

The average number of times a single unit of money changes hands in an economy over a certain period of time is referred to as the velocity of circulation. It's also known as the velocity of money or the velocity of money circulation. It is the rate at which the economy's entire money supply rotates in a particular period of time.

When the velocity of money rises, the velocity of circulation rises as well, indicating that individual transactions are becoming more frequent. A higher velocity indicates that a given quantity of money is being used for several transactions. A high rate of inflation is indicated by a high velocity.