Glossary of Economic Terms: V

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variable rate

A variable rate agreement, as distinguished from a fixed rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.

vault cash

Cash kept on hand in a depository institution’s vault to meet day-to-day business needs, such as cashing checks for customers; can be counted as a portion of the institution’s required reserves.

velocity

The rate at which money balances turn over in a period for expenditures on goods and services (often measured as the ratio of GNP–gross national product– to the money stock). A larger velocity means that a given quantity of money is associated with a greater dollar volume of transactions.

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Last updated February 6, 2004