Income velocity of money

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In economics, income velocity of money is the number of times an individual unit of currency turns over (i.e., is spent) in a specific period of time. Velocity affects the amount of economic activity generated by a given money supply.

The velocity of the money supply is Gross Domestic Product/money (be it M0, M1, M2, or M3; see money supply for details).

A rise or fall in the velocity of money usually follows a rise or fall in the interest rate.

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