Question

Define the velocity of the money supply.

Short answer

The velocity of money isa measurement of the rate at which money is exchanged in an economy

Step-by-step solution

The measurement of the rate. 

The velocity of money isa measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. It also refers to how much a unit of currency is used in a given period.

 The ratio of nominalGDPto a measure of the money supply. 

Velocity is a ratio of nominal $GDP$to a measure of the money supply ($M1orM2$). It can be thought of as the rate of turnover in the money supply--that is, the number of times one dollar is used to purchase final goods and services included in .