What is the velocity of money? Simply defined, the velocity of money is the turnover in the money supply. A shop owner can measure how fast his inventory is selling by calculating "inventory turnover." To do that, he simply calculates Total Sales ÷ Average Inventory for the period in question. See: Inventory TurnOver for more information. But if you expand the idea of turnover to the entire country, you get the "Velocity of Money". Strictly speaking all the velocity of money tells us is how long people hold onto their money. But from that we can infer their motives and perceptions of the economy in general... The Velocity of Money Calculation To Calculate the Velocity of Money, you … [Read more...]