This paper examines how the use of money in Iran’s financial systems has diverted from productive to unproductive activities. Over the last three decades, with the exception of a few years, the liquidity growth rate in the Iranian economy has been greater than the sum of inflation rate and real GDP growth. This difference, according to the quantity theory of money, can be interpreted as a reduction in the income velocity of money. However, considering that the inflation and interest rates have been continuously high (in some cases above %20), it may not be reasonable to accept that the circulation of money has been getting slower than before. One explanation of this paradox is that, during the aforementioned period, the circulation of money did not decline, but “instead the ratio of irrelevant -to -GDP transactions to total transactions (relevant and irrelevant) has gone up”. The increase in this ratio would be largely attributed to a disproportional expansion of unproductive activities in operating within Iran’s economy. Our hypothesis is that the significant increase in the liquidity growth rate, has been a drag on economic productivity and growth, instead of facilitating and enhancing economic growth. To test this hypothesis, we considered the difference between the liquidity growth rate and the sum of inflation rate and real GDP