Income velocity of money. Concept introduction: Income velocity of money refers to how fast money exchanges in hands from one holder to the other. It is the number of times one unit of currency is spent over a given period of time and provides result as to how many economic activity occurs or is possible at a certain level of money supply. The quantity theory of money states that there is a direct relationship between the money supply and the price level. If the amount of money supply in the economy increases, there is an increase in the price at the same level thereby causing inflation.

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Chapter 16, Problem 11P

To determine

Income velocity of money.

Concept introduction:

Income velocity of money refers to how fast money exchanges in hands from one holder to the other. It is the number of times one unit of currency is spent over a given period of time and provides result as to how many economic activity occurs or is possible at a certain level of money supply.

The quantity theory of money states that there is a direct relationship between the money supply and the price level. If the amount of money supply in the economy increases, there is an increase in the price at the same level thereby causing inflation.

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