When the Fed pursues a "counter-cyclical policy", does it actually make the economy more stable?
Also, if the Standard Deviation from say period #2 is smaller than the Standard Deviation from period #1, shouldn't the economy during period #2 be more stable than the one in period #1?
Thanks.
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Yep it does. The government provides polices to promote spending during economic and credit tightening during inflationary periods. There are many different policies but lowing and raising interest rates is one major way.
Second question. I would think if the Standard Deviation (σ) is lower than another data set then you can say the data might be more accurate but you can't say that one period is stable than the other. I would think that you would have to know what is "stable" from a model then compare the data or test the data by using a t test, perhaps. It really depend on your data and what you are trying to find.