The “velocity” of money is

JAMB Economics 2023 295 views
Source: JAMB · 2023

The “velocity” of money is

  1. The money supply multiplied by the price level
  2. The real money supply divided by the real GDP
  3. The ratio of real GDP to the real money supply ✓
  4. The money supply divided by the price level
Explanation

Velocity of money is how many times a unit of money is used in a period to buy final goods. It equals real GDP divided by the real money supply (money supply ÷ price level).

It is the ratio of real GDP to the real money supply. A higher ratio means each naira is spent more often.

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