Money stock is a measure of the supply of money in a particular level of the economy.
M1 is banknotes/Coins in circulation + travelers checks + demand deposits
M2 is M1 + savings deposits + money market deposits
Their respective velocities measure how often money (M1/M2) is spent in a given time.
Hypothetical example: 9/20: John bought a coffee from Jill for $5, then Jill bought shoes from Andrew (with the same $5), then Andrew bought fruit from Paul (with the same $5).
9/20 M = $5 9/20 Velocity of M = 3
Post-recession-America has seen an increase in M1/M2 along with a decrease in the velocity of M1/M2.
It isn't a coincidence that the money supply started behaving abnormally after the FED dropped the federal funds rate close to zero.
When the FED is making unprecedented policy decisions; the people should expect unprecedented results.
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