Abstract: Since PRC was founded, /GDP in China had been rising, or income velocity of money (GDP/ ) had been declining. This puzzling secular phenomenon had not been explained well as yet. This paper would illuminate that the change of monetary demand would not only reflect the increase of final product traded, but also reflect the increase of intermediate product. If the increase of intermediate product could exceed that of final product, then the demand for excess money would increase, which expresses the decline of income velocity of money. This paper would test the hypothesis through the data of Input-output Tables of several countries and Chinese Industrial Enterprises Database. The discovery of this paper suggests that inquiries into money supply, inflation and economic growth would not only take the growth of GDP into account, but also take the growth of intermediate product into account. The intermediate product is a key index for measuring extent of division of labor and specialization.
Keywords：Income Velocity of Money, Intermediate Product, Division of Labor and Specialization
source:Finance & Trade Economics ,No.6,2014