Velocity of money
![Chart showing the log of US M2[1][2] money velocity (green), calculated by dividing nominal GDP by M2 stock, M1 plus time deposits 1959–2010. Employment-to-population ratio is displayed in blue, and periods of recession are represented with gray bars).](/Images/godic/202502/17/M2VelocityEMratioUS0520093908.png")
![Similar chart showing the velocity of a slightly narrower measure of money consisting of currency and liquid deposits M1 1959–2010.](/Images/godic/202502/17/M1VelocityEMratioUS0520093908.png")
![Similar chart showing the velocity of a broader measure of money that covers M2 plus large institutional deposits, M3. The US no longer publishes official M3 measures, so the chart only runs through 2005.](/Images/godic/202502/17/M3_Velocity_in_the_US3908.png")
The term "velocity of money" (also "velocity of circulation of money") refers to how fast money passes from one holder to the next. It can refer to the income velocity of money, which is the frequency at which the average unit of currency is used to purchase newly domestically-produced goods and services within a given time period. In other words, it is the number of times one unit of money is spent to buy goods and services per unit of time. Alternatively and less frequently, it can refer to the transactions velocity of money, which is the frequency with which the average unit of currency is used in any kind of transaction in which it changes possession—not only the purchase of newly produced goods, but also the purchase of financial assets and other items.