Answer to Question #81469 in Macroeconomics for Kelvin

Question

What is the relationship between the velocity of money and the Cambridge k?

Answer 1

Velocity of money and k-coefficient are the parts of the so-called Cambridge equation. k - is a share of cash in an overall money supply in a national economy. Assuming that a national economy is at equilibrium, velocity of money is equal to 1/k. Therefore, velocity of money is inverse to the share of cash in economic agents.