History of Economic Ideas
Countercyclical policy refers to economic measures taken by the government or central bank to counteract fluctuations in the business cycle, aiming to stabilize the economy during periods of expansion and contraction. These policies typically involve increasing government spending and lowering taxes during economic downturns to stimulate growth, while reducing spending and increasing taxes during periods of economic expansion to cool off overheating economies. This approach contrasts with the perspectives of new classical and new Keynesian economics, which have different views on the effectiveness and implementation of such policies.
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