It’s a sort of vestigial behavior from a fur-covered ancestor. The goosebumps are caused by tiny involuntary muscles connected to the follicles of body hair. In a furry animal, this causes the fur to puff out. If an animal is threatened, this makes it look bigger to a predator or other enemy. If the animal is cold, puffing out the fur creates a thicker, more insulating layer of air near the skin, which helps to keep warm.
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