Velocity
MacroDefinition
How fast each dollar in the money supply changes hands annually. Calculated as nominal GDP / M2. Falling velocity dampens the inflationary impact of money creation. Modern velocity has trended down for 30 years: from ~2.0 in 1997 to ~1.4 today.
Quantity Theory of Money: M × V = P × Y (money × velocity = prices × output). Helpful framework but velocity is unstable in the short run.
Quantity Theory of Money: M × V = P × Y (money × velocity = prices × output). Helpful framework but velocity is unstable in the short run.
Formula
M × V = P × Y