Question

how does money velocity and interest rate effect lowes forecast? negative or positive

Answer 1

Money velocity and interest rate are negatively related to the level of money supply in the economy. This is because as velocity of money increases, the money supply will decreases because it increases the number of times that money is changing hands and as it increases, the money supply can be reduced. Also an increase in the level of money supply leads to fall in the rate of interest and vice versa. Thus, increase in money velocity and interest rate lowers the money supply forecast.