The velocity of money measures the
A) proportion of the money supply held as an asset.
B) ratio of the transactions demand to the asset demand for money.
C) average annual rate of increase in the money supply.
D) number of times per year the average dollar is spent on ﬁnal goods and services.

Question

Quizplus · Accepted Answer

The velocity of money is defined as the number of times per year the average dollar is spent on final goods and services. This measures how quickly money circulates through the economy and is often used as an indicator of economic activity. Option A is incorrect because it refers to the demand for money, not the velocity of money. Option B is also incorrect because it describes the composition of the demand for money, not the velocity of money. Option C is also incorrect because it describes the rate of increase in the money supply, not the velocity of money.

The Velocity of Money Measures the