The relationship between velocity

The relationship - ,themoneysupply,thepricelevel,andoutputis *V=P*,Visthe velocity,Pisthepricelevel,.P*Y,thepricelevel ,givesthenominalGD

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The relationship between velocity, the money supply, the price level, and output is  represented by the equation M * V = P * Y where M is the money supply, V is the  velocity, P is the price level, and Y is the quantity of output. P * Y, the price level  multiplied by the quantity of output, gives the nominal GDP. This equation can thus be  rearranged as V = (nominal GDP) / M. Conceptually, this equation means that for a  given level of nominal GDP, a smaller money supply will result in money needing to  change hands more quickly to facilitate the total purchases, which causes increased  velocity.  The equation for the velocity of money, while useful in its original form, can be converted  to a percentage change formula for easier calculations. In this case, the equation  becomes (percent change in the money supply) + (percent change in velocity) = 
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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The relationship - ,themoneysupply,thepricelevel,andoutputis *V=P*,Visthe velocity,Pisthepricelevel,.P*Y,thepricelevel ,givesthenominalGD

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