Government policies can mitigate the impact of business cycles from "summary" of Business Cycles and Equilibrium by Fischer Black
Government policies play a crucial role in managing the impact of business cycles on the economy. During periods of economic expansion, the government may implement contractionary policies to prevent overheating and inflation. These policies include raising interest rates, reducing government spending, and increasing taxes. By doing so, the government aims to cool down the economy and prevent excessive growth that could lead to a boom and bust cycle. On the other hand, during economic downturns, the government may employ expansionary policies to stimulate economic activity. These policies involve lowering interest rates, increasing government spending, and cutting taxes. T...
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