Question #4eaac

1 Answer
Mar 21, 2016

Contracyclical fiscal policy would cut government spending and increase taxes during economic prosperity, and increase spending while cutting taxes during recessions.


During economic booms, reducing government spending and increasing taxes would help cool the economy and fill the coffers for the economic down cycles. In the down cycles, increased spending and lower taxes would help stimulate the economy. The contracyclical fiscal policy would then make the highs lower, and the lows higher, smoothing out the economic peaks and valleys.