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Frauds and Scams > Velocity Of Money

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Velocity Of Money Defined

The amount of times a dollar is spent in a specific time period. Velocity affects economic activity produced by a given money supply, which includes bank deposits and cash in circulation. The Federal Reserve Board considers the velocity of money as a factor in their management of monetary policy. This is because a rise in velocity may preclude the need to stimulate an increase in the money supply. Conversely, a decline in velocity may slow down economic growth.

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