What does the velocity of money represent in economic terms?

The velocity of money represents the rapidity with which money circulates within the economy. It measures how frequently a unit of currency is used to purchase goods and services over a given time period. Essentially, it reflects the rate at which money changes hands, illustrating how quickly economic activity is occurring. A higher velocity indicates that each unit of currency is being spent more frequently, which can signal a robust economy with plenty of transactions happening.

In contrast, the other options describe various aspects of monetary and economic conditions but do not accurately capture the concept of velocity. The growth rate of cash supply pertains to how much money is being created or introduced into the economy, while the rate of inflation reflects the increase in prices over time. Stability of currency value relates to how consistent the purchasing power of money is over time. None of these directly describe how fast money changes hands, which is the essence of the velocity of money.