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Economic Commentary

Velocity and Monetary Targets

To interpret the monetary targets in 1983, we have to know where we have been and where we are going. The equation of exchange, MV=PQ, provides a simple accounting framework for keeping track of where we have been and for suggesting where we may be going. M is the money supply, however defined; V is the related velocity, or turnover of money; P is the general price level; and Q is real output.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Gavin, William T. 1983. “Velocity and Monetary Targets.” Federal Reserve Bank of Cleveland, Economic Commentary 6/6/1983.