explain how the velocity of circulation of money affects the supply of money?
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Velocity of money circulation is the rate at which money is exchanged from one transaction to another.
It also tells how much a unit of currency is used in a given period of time.
Simply put the rate at which people spend money.
Velocity of money is generally calculated as a ratio of gross national product (GNP) to a country's total money reserves.
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Money velocity and its circulation affects the supply and demand of money
Explanation:
- The velocity of money divided the country's GDP by the money supply. The velocity of money shows the rate by which the unit of supply.
- That is currency is being transacted for the goods and services in the economy. The velocity of money is higher in developing or expanding economies.
- Factors that affect the velocity of money and its circulation are money supply, that is if the supply of money falls short of the velocity. The frequency of transactions more is the transaction the more is the velocity.
- The regularity of incomes enables people to spend more freely, the payment system, value of money, and the volume of trade and credit available, etc.
Learn more about the how the velocity of circulation of money affects the supply of money.
- brainly.in/question/6627183 answered by qwlion.
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