The velocity of money in circulation measures:
A)the average length of time that people hold wealth.
B)how fast aggregate spending will increase for a given decline in money demand.
C)how fast inflation will rise for a given increase in the money supply.
D)how quickly money changes hands.
E)how quickly banks can create money.

Question

Quizplus · Accepted Answer

The velocity of money measures how quickly money changes hands in the economy. It is calculated by dividing the nominal GDP by the money supply. It does not directly relate to the average length of time people hold wealth, aggregate spending, inflation, or how quickly banks create money.

The Velocity of Money in Circulation Measures