RE: Money velocity defined Money velocity is the value added by the economy per year in nominal terms — GDP including inflation, or nominal GDP — divided by the money supply. When there is a lot of money being created and the economy expands sluggishly, as was the case for most of the post-financial crisis era, money velocity falls. Essentially, it is the rate that money circulates. However, it is fair to say it is a “dependent variable”. Based on the trillions of dollars the Fed has created since the virus crisis, and are still in the system, should velocity accelerate, inflation will become an even bigger problem. There is evidence this was happening in early 2022.
Chapter 4 - Appendix
Chapter 4 - Appendix
Chapter 4 - Appendix
RE: Money velocity defined Money velocity is the value added by the economy per year in nominal terms — GDP including inflation, or nominal GDP — divided by the money supply. When there is a lot of money being created and the economy expands sluggishly, as was the case for most of the post-financial crisis era, money velocity falls. Essentially, it is the rate that money circulates. However, it is fair to say it is a “dependent variable”. Based on the trillions of dollars the Fed has created since the virus crisis, and are still in the system, should velocity accelerate, inflation will become an even bigger problem. There is evidence this was happening in early 2022.