Countercyclical policy refers to economic strategies used by governments or central banks to counteract fluctuations in the business cycle. When the economy is booming, these policies may involve reducing government spending or increasing interest rates to prevent overheating. Conversely, during economic downturns, they may increase spending or lower interest rates to stimulate growth. The goal of countercyclical policy is to stabilize the economy by smoothing out the highs and lows of economic activity. This approach can help reduce unemployment and maintain consumer confidence, ultimately leading to a more stable economic environment for individuals and businesses alike.