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Inflation targeting and economic stabilty Watch

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    I am stuck on this question,

    Comment to an extent to which the UK inflation targeting promotes economic growth?

    can some1 help me pl0x
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    Paraphrased: How much does a target inflation rate of 2.0% promote economic growth?

    Well... it's easy to Google the link between inflation and economic growth if you want to know how to answer the question. You could easily talk about the policies in place to bring the inflation rate to its target range, and whether or not they are effective. The short/medium/long term consequences will need to be talked about for a top level answer.
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    i would comment on the other 3 macroeconomic objectives (obv. focus on economic growth, but understand how BOP and unemployment are affected) as my first point

    then i'd talk about why 2.0 inflation will promote ec. growth, and why it possibly wont and why a higher/lower value would be better in certain situations

    and then finally id talk about the economic growth in relation to the phillips curve, with higher inflation, lower unemployment, its natural to expect higher economic growth, and you can evaluate about a million things there
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    An environment of macroeconomic stability encourages investment including investment from foreign firms.

    It allows the government to borrow at lower interest rates because investors are less worried about the debt being inflated away so will accept lower interest rates if they know inflation is low.
 
 
 
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