Question

The velocity of money is a the same thing as the long-term growth rate of the money supply. b the money supply divided by nominal GDP. c the rate at which the Fed puts money into the economy. d the average number of times per year a dollar is spent.

Answer 1

b the money supply divided by nominal GDP

Explanation:

The velocity of money is nothing but the ratio of GDP and money supply. In other words, velocity of money also tells us the rate at which money is being exchanged in a country. The constant velocity says that the growth rate in the economy is zero. Velocity of money depends on the rate at which money is spent for finished goods and services per unit time. It is more when spending of money is more and it decreases when people spend less money. The total amount of money that is in circulation or that exists in a country is know as money supply.