velocity of money represented by the average frequency of use currency for the purchase of new products and services in a specific period of time.In many ways, this figure depends on the economic activity in the existing money supply.In determining the specific time period of the velocity of money represented by a number.
easy enough to imagine the calculus can be specified index of a specific example.For example, imagine the private economy, the money supply of 500 rubles, and the presence of two entities: the farmer and the mechanic performing a year on several transactions with each other.Thus, the farmer pays the mechanics of 500 rubles to repair the tractor.Mechanic gets grains at 400 rubles and 100 rubles to pay farmers for inspection and feeding their pets.Thus, the total value of all transactions equal to 1000 rubles, and every ruble was used twice during the year.That is why the velocity of money is equal to two per year.
turnover of money represented a manifestation of the essence of money in their movement.It also covers the process of sharing and distribution.On the volume and structure of turnover affect production and consumption.
For a long production process, which requires an increase in inventories, significantly increases the turnover of money associated with the acquisition.And the release of products with a high labor intensity, increase cash flow is in wages and as a consequence - increase in income of the population, which then are directed to consumption.
One of the components of this indicator is the payment transactions in which money can be used as a means of payment to pay off an obligation.This revolution can be both in cash and cashless forms.
In summary, we conclude that the money should be in constant movement among the major economic actors: government agencies, corporations and individuals.It is their movement in various forms (cash and non-cash) forms the velocity of money.
Under state bodies are understood as control, fiscal authorities and the National Bank.As legal entities may participate in the circulation of money commercial banks.
Released quantity of money in circulation forms the feed, which can be primary, conducted by the central bank, and the secondary (issue of deposit money of commercial banks).
Another way to replenish the money in circulation is a system for tracking the budget debt, which is based only on the placement of government debt in the securities market.
With the sale of these securities the state carries out a loan of funds from entities of the financial system and prepares them as public debt.By purchasing government bonds, the central bank directly increases the circulation of money and forms the basis for the subsequent issuance of deposit offerings of commercial banks.
As mentioned, the issuers of the money supply may be commercial banks, which form deposits, giving citizens or business entities loans.When a loan the money supply is growing, with the return of the loan - is reduced.The occurrence of such an effect of money creation can be successful when buying a commercial bank in the stock market of government securities (only in this case, government bonds can be converted into cash).But an additional issue may occur on the acquisition of foreign currency by the bank.
