Velocity of money

The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. Velocity affects the amount of economic activity associated with a given money supply. When the period is understood, the velocity may be present as a pure number; otherwise it should be given as a pure number over time. In the equations of exchange, velocity of money is one of the key variables determining inflation. If, for example, in a very small economy, a farmer and a mechanic, with just $50 between them, buy goods and services from each other in just three transactions over the course of a year
Mechanic buys $40 of com from farmer.
Farmer spends $50 on tractor repair.
Mechanic spends $10 on barn cats from farmer.
Then $100 changed hands in course of a year, even though there is only $50 in this little economy. That $100 level is possible because each dollar was spent an average of twice a year, which is to say that the velocity was 2 / yr.
where,
Is the velocity for transactions counting towards national or domestic product.Is nominal national or domestic product, and each such transaction is made up of a price part times a quantity purchased part.(Analogously with PT, given the classical dichotomy, PQ may be factored into a product .The determinants and consequent stability of the velocity of money are a subject of controversy across and within schools of economic thought. Those favoring a quantity theory of money have tended to believe that, in the absence of inflationary or deflationary expectations, velocity will be technologically determined and stable, and that such expectations will not generally arise without a signal that overall prices have changed or will change.