The Velocity of M2 Money Stock (M2V) and the Velocity of M1 Money Stock (M1V) are economic indicators that measure the frequency at which currency is used to buy goods and services within a given time period. M2V is calculated by dividing quarterly nominal GDP by the quarterly average of M2 money stock, while M1V is calculated similarly using M1 money stock.
These indicators help gauge economic activity. If the velocity of money is increasing, it suggests that more transactions are happening within the economy. It can also provide insights into whether people are saving or spending money.
The money supply has several components, including M1, M2, and MZM. M1 includes currency in circulation, demand deposits, and other liquid deposits. M2 is broader and includes M1 plus savings deposits, certificates of deposit, and money market deposits for individuals. MZM is the broadest component, encompassing various financial assets.
Comparing the velocities of M1 and M2 can reveal how quickly the economy is spending and saving. MZM's velocity helps determine the frequency of financial asset exchanges in the economy.
These indicators are useful for understanding economic trends and can be found on the Federal Reserve Bank of St. Louis website.
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