What is K-Percent Rule

K-Percent is the rule which was given by Nobel prize winner and Economist Milton Friedman. As per this rule, Govt and central bank should increase the supply of money on the basis of Growth of GDP. It will help the country to solve the liquidity and lead country to control prices.


As per K-Percent rule, reserve bank should supply more money if there is critical position of weak economy. At that time, if reserve bank will tight the money supply, prices will increase and economy may be collapse.

How Does K-Percent Rule Work?

Every time, when central bank supplies more money in the market, interest rate will decrease. Public gets more cheap loan. So, they will start their business. They can keep low prices of their products because loan at low rate will help them to grow fastly by reducing their products cost. So, by this way, economy will grow.

One of important point, supply of money should increase which will equal to growth of real gross domestic product.