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Other Money Supply Indicators

Since 2000, the velocity of M1 and M2 money stock has been at its lowest. This indicates that though the monetary base is huge and there is a lot of money in the hands of consumers, money is not changing hands frequently. The Prime Bank Lending Rate has also been at its lowest point during the last couple of years. This translates to the fact that interest rates on loans for the average consumer are at an all time low. This can be seen as the Central Bank's initiative to make borrowing easier and stimulate economic activity. Some Definitions *The M1 Multiplier is the ratio of M1 to the St. Louis Adjusted Monetary Base. (Source: St. Louis Federal Reserve) It indicates the amount of cash and demand deposits generated for the common man by one dollar in the monetary base. *Velocity is a ratio of nominal GDP to a measure of the money supply. It can be thought of as the rate of turnover in the money supply--that is, the number of times one dollar is used to purchase final goods and services included in GDP. (Source: St. Louis Federal Reserve) *Monetary Base: The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves. This measure of the money supply typically only includes the most liquid currencies. (For additional information on the Adjusted Monetary Base, please see the first source link listed in the Sources section at the bottom of this page.) (Source: *Prime Bank Lending Rate: The interest rate that commercial banks charge their most credit-worthy customers. Generally a bank's best customers consist of large corporations. The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate at which banks lend to one another. The prime rate is also important for retail customers, as the prime rate directly affects the lending rates which are available for mortgage, small business and personal loans. (Source:

M1 - Money Multiplier [2203] M1 and M2 Velocity [2201] M1 and M2 Money Stock [2202]
Currency in Circulation [2216] St. Louis Adjusted Monetary Base [2215] Prime Bank Loan Rate [2204]

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