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Economics
Velocity of Money
How quickly money changes hands in an economy — a measure of economic activity.
Velocity of money = GDP ÷ Money supply. When velocity is high the economy is humming. When it’s low, even printing more money may not stimulate growth. Central banks watch it closely.
It's how fast the same pound note goes from your pocket to the shop, to the supplier, to wages, and back again.
Real world: During boom times money moves fast (high velocity). During recessions or when people are scared, money sits in banks and velocity drops — the same money is used less often, slowing the economy.
💡 High velocity of money means the economy is lively — low velocity means money is hiding instead of working.