Countercyclical policies ________.
A) lead to hyperinflation
B) lower output below an economy's potential level
C) increase the intensity of economic fluctuations in an economy
D) smooth the rate of growth of an economy over time

Question

Quizplus · Accepted Answer

Countercyclical policies are designed to counteract the natural cyclical fluctuations of the economy by dampening the boom and bust cycles. Through this process, the rate of growth of the economy over time is smoothed out. This is accomplished through a variety of fiscal and monetary policies, such as government spending, interest rate adjustments, and tax policy. Countercyclical policies help to stabilize an economy and prevent the extremes of hyperinflation and output levels below potential.

Countercyclical Policies ________