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Many central banks, including the Bank of England, have adopted a monetary policy of targeting a low, positive and stable inflation rate. In addition, the

Many central banks, including the Bank of England, have adopted a monetary policy of targeting a low, positive and stable inflation rate. In addition, the Bank of England also supports the Government's objectives for growth and employment. a) (6 marks) Explain why it is good to target a "low, positive and stable" inflation rate. b) (4 marks) What is a recession and what are its characteristics? c) (8 marks) When the U.K. economy goes into recession, how should the Bank of England set the official Bank rate to help bring the economy out of recession? Explain the mechanism and refer to the characteristics you listed in part (b)

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