Keynesian economics advocates the use of discretionary countercyclical policies to lessen the impact of the business cycle. One example of a countercyclical fiscal policy is a progressive tax. By taxing a larger proportion of income when the economy expands, a progressive tax tends to decrease demand when the economy is booming, thus reining in the boom.
Other schools of economic thought, such as monetarism and rational expectations, hold that countercyclical policies may be counterproductive or destabilizing, and therefore favor a laissez-faire fiscal policy as a better method for maintaining overall economic health(different from health economics).
Unemployment is an example of a countercyclical economic indicator.
Similarly, in finance, an asset that tends to do well while the economy as a whole is doing poorly, is typically referred to as countercyclical. For example, this could be a business, or a financial instrument whose value is derived from a business, that sells an inferior good.
Why Does Countercyclical Monetary Policy Matter? Modern Capitalistic Economies Use Stabilization Policies to Minimize Fluctuations in the Unemployment and Inflation Rates
Jun 22, 2001; Why does countercyclical monetary policy matter? Modern capitalistic economies use stabilization policies to minimize...