Currency, The Money Supply, and The Velocity of Circulation

The McConnell web site poses some interesting questions regarding currency, the money supply, and the velocity of circulation.
First answer web-based question number 3-17 and then answer web-based question number 17-16 which are both quoted below from the McConnell website .
3-17 Web-Based Question
Everything You Wanted to Know About U.S. Currency but Were Afraid to Ask

U.S. currency is made up of coins and paper money. Visit the Federal Reserve Bank of Atlanta and the U.S. Treasury to answer the following questions.

  1. What is the largest denomination note currently in circulation?
  2. What has been the largest denomination note in circulation, and when was it last printed?
  3. The Federal Reserve Act requires that adequate backing be pledged for all Federal Reserve Notes in circulation.
  4. What are some tips for spotting counterfeit currency?
  5. When was the last silver dollar minted?
  6. What have been the largest and smallest U.S. coin denominations since the Coinage Act of 1792?
17-16 Web Based Question
The Equation of Exchange

The fundamental equation of monetarism is the equation of exchange: MV=PQ=GDP. The velocity of money V can be found by dividing GDP by M the money supply. Calculate the velocity of money for the past few years.

  1. What Is the Current Velocity of Money?
  2. Which GDP data should be used: real or nominal GDP? Why?
  3. How stable is V during this time?
  4. Is V increasing or decreasing?
Get GDP data from the Economagic web site.
Money supply data can be found at the Federal Reserve under Money Stock Liquid Assets and Dept Measures - Historical Data.

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Last updated April 24, 2002

Send comments to: jbremer@oakton.edu