What is the goal of countercyclical policies?

The goal of countercyclical policies is to smooth out fluctuations in the business cycle. These policies are designed to counteract the effects of economic downturns or booms. When the economy is in a recession, governments may implement expansionary fiscal policies, such as increasing government spending or cutting taxes, to stimulate economic activity. Conversely, during periods of rapid economic growth, they may adopt contractionary measures to prevent overheating, such as reducing spending or increasing taxes. This approach aims to stabilize the economy, minimize the severity of economic cycles, and promote sustainable growth over time.

Other options such as promoting inflation or encouraging uncontrolled economic growth do not align with the purpose of countercyclical policies, which focus on moderation and stabilization rather than creating extremes. Increasing taxation may be a tool used within these policies but is not a primary goal in itself.