An example of countercyclical fiscal policy is:
A)raising government spending when the economy is above potential.
B)raising government spending when the economy is at potential.
C)reducing government spending when the economy is above potential.
D)reducing government spending when the economy is below potential.

Question

Quizplus · Accepted Answer

Countercyclical fiscal policy involves taking actions opposite to the current economic trend. Reducing government spending when the economy is above potential helps cool down an overheating economy, aligning with the principles of countercyclical policy.

An Example of Countercyclical Fiscal Policy Is