  Gross Domestic Product(GDP) is a widely used measurement of economic growth
representing the market value of all final goods and services produced by a
country within a given time. In this paper we question the assumption that GDP
measures production, and suggest that in reality it merely captures changes in
the rate of expansion of the money supply used to measure the price data it is
derived from. We first review the Quantity Theory of Money $MV=PT$, and show
that the Velocity of Circulation of Money(V) does not affect the price level as
claimed, as it is also a factor of the quantity of transactions(T). It then
follows directly that attempts to measure total production from any form of
price data as the GDP measurement does, will necessarily be confounded by the
inverse relationship between prices and the quantity of production, which
requires that as the total quantity of production increases, prices will drop.
Finally, in support of this claim we present an empirical analysis of the GDP
of nine countries and one currency union, showing that when normalized for
money supply growth GDP measures have been uniformly shrinking over the last 20
years, and discuss the possible reasons for this behaviour.
