Velocity of Money

Running head : VELOCITY OF MONEY

Velocity of Money

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Abstract

Measuring velocity is important for understand the economic implications of money circulation in economy . In simple terms , investors frequently use velocity of money to measure the quality and effectiveness of the major financial transactions in economy . Velocity of money can also be effectively used for personal financial purposes and in different types of microeconomic calculations

Velocity of Money

To begin with , money is a good that is widely used for financial

br purposes and as the instrument of financial transactions that involve transferring services or goods from one subject of economic relationships to another . In other words , money works to promote and facilitate the transfer of goods and services between individuals and firms . Professionals in economics usually differentiate between the three widely accepted forms of money : bank money , commodity money , and fiat money (Dwivedi , 2005 . Commodity money usually has the same value as that of money . Dollar bills , however , are the examples of fiat money the value of which is less than the value of money . Bank money is usually represented by credit and checks . Regardless the type of money in economy money always fulfills the three basic functions

First , money is the medium of exchange . Money is a kind of barter , a universal instrument which individuals and businesses use to purchase goods and services . With money , individuals do not need to search for a commodity equivalent but only have to provide predetermined amount of...