Question: In theory the velocity of money should rise with the
In theory, the velocity of money should rise with the cost of holding it. To assess the theory, plot the opportunity cost of holding M2 – defined as the difference between the three-month Treasury bill rate (FRED code: TB3MS) and the interest rate on M2 components (FRED code: M2OWN) and (on the right scale) the percent change from a year ago of M2 velocity (FRED code: M2V). What do you conclude?
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