Which of the following best defines the velocity of money?
A)It is the rate at which the central bank puts money into the economy.
B)It is the same thing as the long-term growth rate of the money supply.
C)It is the money supply divided by nominal GDP.
D)It is the average number of times per year a dollar is spent.

Question

Quizplus · Accepted Answer

Velocity of money is defined as the number of times a unit of currency is used to purchase goods and services within a particular period of time. Therefore, option D is the correct choice as it defines the velocity of money as the average number of times per year a dollar is spent. Option A is incorrect as it refers to central bank actions, which are not a part of the definition of velocity of money. Option B is incorrect as the long-term growth rate of the money supply is a separate concept. Option C is incorrect as it defines money supply over nominal GDP, not the number of times money is spent.

Which of the Following Best Defines the Velocity of Money