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Chapter 15: Q. 35 (page 378)

Think about the business cycle: during a recession,

unemployment increases; it decreases in an

expansionary phase. Explain what happens to TANF, SNAP, and Medicaid programs at each phase of the business cycle (recession, trough, expansion, and peak).

Short Answer

Expert verified

Government programs like TANF, SNAP, and Medicaid have proven beneficial for low income generating individuals, during a recession,

unemployment increases such programs will provide aid in purchasing food and deduction in taxes.

Step by step solution

01

Step 1.  Business cycle 

An economy goes through different phases in which demand fluctuates. These phases are recession, trough, expansion, and peak.

02

Step 2. Recession 

Unemployment increases during recession, so the spending on welfare programs such as TANF, EITC, SNAP, and Medicaid increases during a recession.

03

Step 3. Trough 

Trough is the lowest point of business cycle, during this period, the unemployment rate would be highest. So, the welfare spending would be highest durign this period. All the welfare programs have to transfer much amount and increase providing aid in the time of low production & unemployment in the economy.

04

Step 4. Expansion

During the expansion period, the economy starts to recover from trough. In this period, payments through welfare programs would decline as unemployment declines.

05

Step 5. Peak

Peak is the highest point on the business cycle. The economy would be performing at its best, the unemployment rate would be lowest and the spending on welfare would be the least.

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