Velocity is commonly calculated by which of the following formulas?

Question

Quizplus · Accepted Answer

Velocity of money refers to the rate at which money circulates in the economy. It is calculated as the ratio of the value of transactions in an economy to its money supply. Thus, option B, which calculates velocity as the value of transactions divided by the money stock, is the correct formula. Option A is incorrect because it calculates the ratio of the value of money to the nominal GDP, which is not related to velocity. Option C is also incorrect because the value of financial transactions does not reflect the entire transactions in the economy, and dividing it with GDP would not represent velocity. Option D is unrelated to the concept of velocity.

Velocity Is Commonly Calculated by Which of the Following Formulas