1. The velocity of money is defined as___________ income divided by the supply of money.
2. The quantity equation links money, velocity, real income, and ___________.
3. If we know the growth of velocity, income, and the money supply, we can explain the___________ rate.
4. If the growth of the money supply is 4 percent a year, velocity decreases by 1 percent, and there is no growth in real output, the inflation rate equals___________.
5. Velocity and ATMs. Suppose the introduction of ATMs led households to hold less of their wealth as deposits in banks or savings and loans. How would this affect measured velocity?
6. Using the Quantity Equation. If the growth rate of money is 10 percent per year, annual inflation is 7 percent, and the growth rate of velocity is 1 percent per year, what is the growth rate of real output?
7. Velocity of Money in the United States. Using the Federal Reserve Bank of St. Louis Web site (www.research.stlouisfed.org/fred2 ), calculate the velocity of M1 and M2 in 1960 and 2000. How have they changed?