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– The End Of Cash? (Gold Eagle, April 30, 2015):
Money velocity in its simplest terms is a measurement of how fast money is moving through the economy. Another way of looking it is that money velocity is simply a comparison between GDP and money supply. If money velocity is falling then that tells us money supply is increasing at a faster rate than GDP.
M1 is notes and coins in circulation, plus traveler’s cheques, demand deposits and other chequable accounts. A rising velocity is a sign that the economy is relatively healthy whereas a falling velocity might be an indication of a slowing economy or an underperforming economy.