What it is:
How it works (Example):
Often, the K-percent rule mirrors GDP growth, meaning that K = growth in GDP. GDP growth is usually between 1% and 5%. If the Federal Reserve wants to stimulate a sluggish , it might make K > GDP growth, meaning that it grows the supply at a rate higher than the rate of growth in the economy as a whole. If the Federal Reserve wants to slow down the economy, it might make K < GDP growth, meaning that it grows the money supply at a rate lower than the rate of growth in the economy as a whole.
Why it Matters:
One of the Federal Reserve's primary economy. This means ensuring that the economy neither grows too slowly or too quickly. Quick growth, in particular, creates inflation. The K-percent rule regulates how much the supply grows in the United States, thereby keeping inflation in check.is to protect and stabilize the American