2 Velocity ■ basic concept:the rate at which money circulates definition:the number of times the average dollar bill changes hands in a given time period example:In 2001, .$500 billion in transactions money supply $100 billion The average dollar is used in five transactions in 2001 ·So,velocity=5 CHAPTER 7 Money and Inflation slide 13 CHAPTER 7 Money and Inflation slide 13 Velocity ▪ basic concept: the rate at which money circulates ▪ definition: the number of times the average dollar bill changes hands in a given time period ▪ example: In 2001, • $500 billion in transactions • money supply = $100 billion • The average dollar is used in five transactions in 2001 • So, velocity = 5 2