The given rule was laid out on the theory that the central Bank should consider increasing the respective money supply through a constant percentage on an annual Basis.
The K-percent Rule aims at proposing that the bank should set the growth of money supply at the rate that stands equal to growth of real GDP every year. In
Friedman had the belief that monetary policy turned out to be a significant contributor to cyclical fluctuations occurring in the Economy.
Particularly, Friedman added that the money supply should be capable of rising at an annual rate between the range of 3 & 5 percent. He even stated that the accurate definition of the adopted money along with the accurate growth rate selected would make minimal difference in comparison to the definitive choice of a specific definition along with a specific growth rate.
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