countercyclical policy

Countercyclical policy refers to government actions taken to stabilize the economy by offsetting its fluctuations. During economic downturns or recessions, policymakers may increase spending or cut taxes to boost demand and support growth. Conversely, in periods of rapid expansion or inflation, they might reduce spending or increase taxes to prevent the economy from overheating. The goal is to smooth out the peaks and troughs in economic activity, helping maintain stable employment and prices. Essentially, countercyclical policies act as a balancing force, working against the natural ups and downs of the economy to promote steady growth.