Enter the GDP and the money supply into the calculator to determine the velocity of money.
- Money Supply Calculator
- Comparative Advantage Calculator
- GDP Calculator (Gross Domestic Product)
- Economic Growth Calculator
Velocity of Money Formula
The following formula is used to calculate the velocity of money.
VoM = GDP
- Where VoM is the velocity of money
- GDP is the gross domestic product
- MS is the money supply
To calculate the velocity of money, divide the gross domestic product (GPD) by 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 its money supply. In other words how fast money moves through its 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
The velocity of money is the measure or the rate at which money is moved or exchanged throughout 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.
