Question : The velocity of circulation of money is _______.
Option 1: k times the value of transactions
Option 2: the number of times a unit of money changes hands during the unit period
Option 3: the number of times the same transactions can be repeated by a given volume of money supply
Option 4: the ratio of money balance to the value of transactions
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Correct Answer: the number of times a unit of money changes hands during the unit period
Solution : The correct option is the number of times a unit of money changes hands during the unit period .
The velocity of circulation of money is a concept in economics that refers to the number of times a unit of money is used in transactions within an economy during a specific period, typically a year.
Mathematically, the velocity of circulation (V) is expressed as:
V = P × Y/M
- V is the velocity of circulation.
- P is the price level (average price of goods and services),
- Y is the real GDP (real output or real income),
- M is the money supply.
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