K Percent rule can be defined as a microeconomic concept that states the theory of controlling inflation. According to this theory the best way to control the inflation is that over a long period of time the central banking system and other monetary authorities agree to automatically grow the amount of money floating in the market with a certain factor that is called the K factor. The increase of the money by the central banks and other authorities is done in each year regardless the cyclic condition of the economy of the country. The objective of the implementing K percent rule in a given economy is to bring the growth rate of the economy equals to the real growth or the GDP of the country. The typical growth rate of the economies ranges from 2 to 4 percent as seen and analyzed in different economies of the world.
The K Percent rule was postulated by noble award winning economist and financer Milton Friedman. Milton Friedman was considered as the father of the monetary concepts and monetary growth related principles that deals with the policies that are directly related to the increase or decrease in the rate of inflation within an economy. When the economy is weak Government and other monetary authorities can decide of releasing the money in the market to balance the effect of inflation.
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