Question

suppose that the economy enters a boom and becomes overheated. if the fed pursues countercyclical monetary policy but overreacts, this causes output in the short-run to go

Answer 1

Counter-cyclical fiscal measures are policy measures which counteract the effects of the economic cycle.

What is economic cycle.?

The four cyclical stages of the economy—expansion, peak, contraction, and trough—are collectively referred to as an economic cycle. The stage of the economic cycle we are in at the moment can be determined by variables like GDP, interest rates, total employment, and consumer spending.

Fiscal policy actions that counteract the effects of the economic cycle are known as countercyclical fiscal measures. When the economy is slowing, for instance, countercyclical fiscal policy actions might include raising spending on the government or lowering taxes to encourage economic recovery.

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