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Money Circulation

Volume 934: debated on Tuesday 28 June 1977

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asked the Chancellor of the Exchequer what has been the velocity of circulation of money in each of the past five years in the United Kingdom.

Data for the velocity of circulation of money on each of the definitions presently used in the United Kingdom are published, with graphs, in Economic Trends. Quarterly figures for the velocity of circulation of Ml and sterling M3 during the last five years are reproduced below:

VELOCITY OF CIRCULATION
MlSterling M3
1972—
15·5743·037
25·2302·925
35·4592·790
45·5642·779
1973—
15·9172·839
25·6602·658
35·7642·583
45·9362·493
1974—
15·8782·368
26·2702·477
36·5542·630
46·4262·638
1975—
16·5212·730
26·6892·852
36·6042·927
46·6213·043
1976—
16·6543·131
26·5243·089
36·5793·188
46·7543·196

Notes:

Velocity is calculated as the ratio of GNP at current market prices seasonally adjusted at an annual rate to the centred quarterly average of Ml or sterling M3 seasonally adjusted.

Source: Economic Trends May 1977.

asked the Chancellor of the Exchequer what he estimates will be the velocity of circulation of money in the United Kingdom in 1977.

On the basis of the projections for real GDP and prices given in the 1977–78 Financial Statement and Budget Report, I estimate that achieving the mid-point of my announced guideline for the growth of sterling M3 (9 per cent. to 13 per cent.) would be consistent with a small rise in its velocity of circulation to about 3·25 to 3·3 by the end of 1977.