§ Mr. Austin Mitchellasked the Chancellor of the Exchequer, further to his reply dated 20 December concerning the increase in the money supply in 1979, whether he will explain how the growth of the money supply may differ from the growth in the money gross domestic product.
§ Mr. LawsonThe ratio of money GDP to the money stock is known as the velocity of circulation, and changes in the velocity of circulation defined in this way reflect differences in the rates of growth of these two aggregates. In my reply to the hon. Member on 18 January—[Vol. 976, c.893–5].—I mentioned a number of cases when velocity changes could occur in the short run. Velocity is also affected in both the short run and the long run by, inter alia, changes in the rate of interest and in inflationary expectations.