The velocity of money refers to the rate at which money circulates in an economy. It measures how quickly money changes hands and is used for transactions. A higher velocity indicates that money is being spent and re-spent frequently, which can signal a healthy economy. This concept is often analyzed in relation to the money supply and economic activity. When the velocity of money is low, it may suggest that people are saving rather than spending, potentially leading to slower economic growth. Economists use this measure to understand consumer behavior and overall economic health.