Enter the GDP and the money supply into the calculator to determine the velocity of money.
Velocity of Money Formula
The following formula is used to calculate velocity of money.
VoM = GDP / MS
- Where VoM is the velocity of money
- GDP is the gross domestic product
- MS is the money supply
Velocity of Money Definition
A velocity of money is defined as the ratio of the gross domestic product of a country to it’s money supply. In other words how fast money moves through it’s economy.
Velocity of Money Example
How to calculate the velocity of money.
- First, determine the GDP.
Calculate the GDP using the calculator linked above or through research. For this example we will say the GDP is $1,000,000.00 (This is not realistic and will be much more for most countries).
- Next, determine the money supply.
For this example we will assume the money supply is $500,000.00.
- Finally, calculate the velocity of money.
Using the formula we find the velocity of money to be 1,000,000/500,000 = 2 (200%)
FAQ
Velocity of money is the measure or the rate at which money is moved or exchanged throughout in the economy of a given country. It can also be used to describe the number of times a unit of a specific currency is used in a given time.
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