In Chapter 24 we saw that fiscal policy could potentially be used to stabilize aggregate demand and thereby stabilize real output. For example, in a recession, the government might reduce tax rates or increase spending to stimulate aggregate demand; in a booming economy, the government might reduce spending or increase tax rates to prevent the economy from overheating. Thus running cyclically adjusted budget deficits in recessions and cyclically adjusted budget surpluses in booms is one obvious way of implementing counter-cyclical fiscal policy.