Federal government spending has a countercyclical impact that helps to stabilize the economy.
Automatic stabilizers such as transfer payments will rise during a recession,preventing a large drop in consumption.

Question

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Federal government spending has been recognized as an important tool to stabilize the economy, particularly during periods of recession. Automatic stabilizers such as transfer payments, progressive income tax, and unemployment insurance are known to work in a counter-cyclical manner, that is they increase during a recession and decrease during periods of growth, thereby helping to stabilize consumption and prevent a large drop in economic activity.

Federal Government Spending Has a Countercyclical Impact That Helps to Stabilize