# Velocity of Money

*Macro & Economy — Finicade finance glossary*

Velocity is how many times a unit of currency is spent in a year — nominal GDP divided by the money supply. It's the variable that broke the simple monetarist prediction after 2008: central banks expanded the money supply enormously and inflation didn't follow, because velocity collapsed as the new money sat in bank reserves rather than circulating.

**Formula:** `Velocity = Nominal GDP ÷ Money supply`

**Also known as:** money velocity, circulation velocity

**Related terms:** [Quantity Theory of Money](https://finicade.com/glossary/quantity-theory-of-money), [Money Supply](https://finicade.com/glossary/money-supply), [Inflation](https://finicade.com/glossary/inflation), [Quantitative Easing](https://finicade.com/glossary/quantitative-easing), [GDP (Gross Domestic Product)](https://finicade.com/glossary/gdp)

Source: https://finicade.com/glossary/velocity-of-money