What are the important factors that determine the velocity of money?
What will be an ideal response?
The main determinants of velocity are as follows:(a) Efficiency of the payments system: If it were possible to convert interest-bearing assets into money on short notice and at low cost, rational individuals might prefer to use, say, credit cards for most purchases. That way, the same volume of transactions could be accomplished with lower money balances. By definition, velocity would rise.(b) Interest rates: The higher the rate of interest, the greater the opportunity cost of holding money. Therefore, as interest rates rise, people want to hold smaller cash balances which means that the existing stock of money circulates faster, and velocity rises.
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If marginal revenue exceeds marginal costs
A) production should be increased. B) production should be increased and profits will grow. C) production should be increased and losses will decrease. D) all of these choices are possible.
The fundamental source of monopoly power is
a. barriers to entry. b. profit. c. decreasing average total cost. d. a product without close substitutes.
The country that has recently been suffering from deflation is
A. the U.S. B. Japan. C. China. D. Canada.
If economic activity increases, it follows that economic welfare:
A. may increase, decrease, or remain unchanged depending on the nature of the increase in economic activity. B. increases as more goods and services become available. C. does not change since it does not depend on the level of economic activity. D. decreases as more resources are depleted.