M2 Velocity

M2 Velocity is a ratio of nominal Gross Domestic Product (GDP) to a measure of the money supply, in this case M2. It can be thought of as the rate of turnover in the money supply (the number of times one dollar is used to purchase final goods and services included in GDP). When M2 Velocity is declining it reflects an underlying weakness in the economy and declining velocity is usually a forerunner before a deflationary period.

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