I am not an economist but I am trying to track down and understand an economic principal (and/or theory) that I think is called "transaction frequency" but when I go searching on that term I find only similar phrases so obviously I am in error. Below is the best way I can describe what I am looking for.

This is related to what is commonly called in the media "wealth inequality".

I remember about a year ago seeing a video that talked about the economy and how transactions (buy/sell exchanges) help it. Sadly I cannot find that video (and if it used invalid terminology maybe that is a good thing).

What the video presented was that there is a spectrum of transactions defined by the two variables of transaction size and transaction frequency. The video asserted that wealthy individuals (top 20% of the population) tend to make transactions that are large in size but relatively few in the scheme of things (such as multi-million dollar investment buys). Conversely, the video asserted that individuals in the vast majority (80%) of the population mostly make small size transactions in fairly high frequency (i.e.: tens of millions of every day retail & service purchases). Finally the video asserted that it is each transaction -- no matter what size -- that "benefits" the economy and that this means that more money in more hands causing more transactions is much more beneficial to the economy than the relatively few large investments.

Now like I said I am not an economist so I do not know if these assertions are accurate or accepted. I do not even understand exactly how a transaction "benefits" the economy. However if I am ever to achieve understanding then I need to know what it is I am trying to research and thus this question.

Thank you for any information on this matter.

PS: I have often heard statements like "Each 1 dollar spent generates an additional X.XX dollars in economic activity." (Is there a name for this concept?) so perhaps that is what the video was attempting to suggest as the "benefit" of each transaction?

  • $\begingroup$ It would be great if you could find the video. The research on this area (empirical or theoretical) seems to be very minimal. The only bits I found (but still far from the issue) are this paper on how the number of spending transactions have fallen in the US, and this one about how buying locally would lower inequality. BTW, I think this is a superb question! Someone should do research on this! $\endgroup$
    – luchonacho
    Aug 12 '17 at 8:57
  • $\begingroup$ I think the video is stating that small transactions have a higher velocity (i.e. the money circulates quicker) than large transactions. That makes sense. Large transactions are often investments that takes months or even years. Buy something in the neighbourhood store and the money will be back in circulation within days or weeks. $\endgroup$ Sep 11 '17 at 11:18
  • $\begingroup$ Regardless of whether what you remember from the video is theoretically and/or empirically correct: Are you talking about "velocity of money"? $\endgroup$
    – nathanwww
    Apr 9 '18 at 15:27
  • $\begingroup$ I'm not sure how this got bumped but thank you. It does seem that velocity of money is the terminology I needed (thank you ThisIsNoZaku and nathanwww) but as @luchonacho stated there does not seem to be a lot of research material on this (or at least not much that is intellectually accessible to the non-economist layman).I hope the Community can help. I will be here to answer questions every day or two (my work is keeping me very busy so I can't be here at SE as much as I normally am). Thank you in advance. $\endgroup$
    – O.M.Y.
    Sep 9 '18 at 3:30

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