Think about the business cycle: during a recession, unemployment increases; it decreases in an e

Name: Problem 35, Chapter 14: Principles of Microeconomics for AP® Courses
Uploaded: 2021-03-17T20:13:17-08:00
Duration: 8 min 8 s
Channel: Dylan Katz
Description: 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).

step 1 Hello everyone. My name is Dylan Katz. And today we're going to be having a nice discussion abou

Think about the business cycle: during a recession,...

Key Concepts

Automatic Stabilizers

Automatic stabilizers are mechanisms built into government fiscal policies that automatically increase spending or decrease tax burdens in response to economic downturns without additional legislative action. Programs like these respond in a countercyclical manner by expanding benefits during recessions, thereby cushioning the blow of increased unemployment and decreased incomes, and contracting during expansions as financial conditions improve.

Means-Tested Program Operation

Means-tested programs assess eligibility based on an individual or household’s income and assets, meaning that eligibility increases as economic conditions worsen. During a recession or trough, more people meet the income criteria, leading to higher enrollment and greater strain on program resources. Conversely, during periods of expansion or peak, fewer individuals qualify as their economic circumstances improve.

Social Safety Net Programs

Social safety net programs, such as those providing cash assistance, food benefits, and healthcare coverage, are designed to support individuals and families during times of economic hardship. These programs help mitigate the negative consequences of economic downturns by providing necessary resources to stabilize household incomes and maintain access to essential services.

Business Cycle Phases

The business cycle describes the periodic expansion and contraction of economic activity, typically identified as the phases of expansion, peak, recession, and trough. Each phase represents different levels of economic activity, affecting employment, income, and overall demand within an economy. Understanding these phases is essential for analyzing changes in both labor market conditions and governmental support measures.

Transcript

00:02 Hello everyone.

00:04 My name is dylan katz.

00:18 And today we're going to be having a nice discussion about the business cycle and how it relates to federal funding of medicaid and income dependent assisted programs.

00:35 Okay, so first of all, let's establish what our business cycle is.

00:47 So first we have our peak.

00:54 Which will then go down to a recession, down to the lowest point, which is the trough, and then up to expansion before it returns to a peak.

01:27 So these are the four stages of the business cycle.

01:30 Now quickly, to go over our medicaid programs, we first have snap, t, t, a, now, snap is short for supplemental nutrition assistance program, where you can think of these as food stamps.

02:20 And tanf is temporary assistance for needy families, and this is, you know, this would help things like bills.

02:35 Okay.

02:35 And what's important about these are they're both, they're both income -based programs.

02:54 So theoretically, when people's income is at their highest, you'll have low eligibility for these programs, and vice versa.

03:04 When people's incomes at their lowest, you'll subsequently have high eligibility.

03:11 So then, who's basically interested in that information? well, that would be the federal government.

03:29 So we can draw, this is our little government building here.

03:41 And their budget goes up as applications go up.

04:04 So going back to our business cycle here.

04:08 If we start at, say, the recession phase, we're not going to be at too great of an economy, yet we're not at the trough.

04:19 So if we do a visual representation, like a graph here, and we do like economic strength on our on our x here.

04:37 And then on our y, we'll have, say, funding.

04:49 This would be funding for, again, these medicaid programs here.

04:56 So when we're in a recession, you can assume that the economic strength is around, the middle because it's not in the peak nor the trough...

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