velocity of circulation

From the mere fact, therefore, that the money spent for goods must equal the quantities of those goods multiplied by their prices, it follows that the level of prices must rise or fall according to changes in the quantity of money, unless there are changes in its velocity of circulation or in the quantities of goods exchanged.

Finally, if there is a simultaneous change in two or all of the three influences, i. e., quantity of money, velocity of circulation, and quantities of goods exchanged, the price level will be a compound or resultant of these various influences.

Likewise, it will be undisturbed if the quantity of money is doubled and the quantity of goods is doubled, while the velocity of circulation remains the same.

If we divide the year's expenditures, E, by the average amount of money, M, we shall obtain what is called the average rate of turnover of money in its exchange for goods, E/M that is, the velocity of circulation of money.

Similarly, we shall now use M´ to express the total deposits subject to transfer by check; and V´ to express the average velocity of circulation.