The velocity of circulation is the average number of times a single unit of currency is spent on goods and services during a specific period, usually one year.

It measures the speed at which money moves through an economy:

• High velocity means money is changing hands frequently, which often signals high economic activity.
• Low velocity suggests that people or businesses are holding onto their money instead of spending it.

In economics, this concept is part of the quantity theory of money, expressed by the formula MV = PY. While economists often assume velocity to be stable, it can actually change based on factors like interest rates and how people choose to make payments.