Money pp 328-332 | Cite as

Velocity of Circulation

  • J. S. Cramer
Part of the The New Palgrave book series (NPA)

Abstract

The velocity of circulation of money is V in the identity of exchange
$$ MV \equiv PT $$
which is due to Irving Fisher (1911). On the left-hand side, M is the stock of money capable of ready payment, i.e. currency and demand deposits, or, in modern parlance, M1; on the right, P is the price level and T stands for the volume of trade. PT is usually identified with total transactions at current value, which must be identically equal to total payments. All these variables are aggregates. The identity defines V as PT/M, that is the ratio of a flow of payments to the stock of money that performs them; its dimension is time−1.

Keywords

Income 

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Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Limited 1989

Authors and Affiliations

  • J. S. Cramer

There are no affiliations available

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