Question

Describe what happens in each part of the business cycle.

1) Expansion
2) Peak
3) Contraction/Recession
4) Trough

Answer 1

The business cycle consists of four phases: expansion (increased economic activity), peak (highest economic indicators), contraction/recession (decreased economic activity), and trough (lowest point before recovery). Social support programs like TANF, SNAP, and Medicaid see higher enrollments during recessions and lower enrollments during expansions.

Step-by-step explanation:

The Four Phases of the Business Cycle

The business cycle refers to the fluctuations in economic activity that occur over time. These fluctuations encompass four distinct phases:

1. Expansion: This phase is characterized by increasing economic activity, rising levels of employment, and generally positive economic indicators. Businesses tend to invest more due to increased profits, and consumer spending usually goes up, leading to further growth. This phase continues until the economy hits its peak.
2. Peak: The peak is the highest point of economic activity in the business cycle. During the peak, economic indicators like GDP, employment, and sales reach their maximum levels. However, this high level of activity is not sustainable and often leads to overproduction and inflationary pressures.
3. Contraction/Recession: Following the peak, the economy enters a contraction or recession phase, where economic activity slows down. Unemployment rates typically increase, consumer spending decreases, and businesses may reduce investments. This phase lasts until the economy hits its trough.
4. Trough: The trough is the lowest point in the business cycle, marking the end of the recessionary period. Economic indicators are at their lowest, but it is also the point where the economy starts to recover as measures are usually taken to stimulate growth.

During a recession, programs like TANF, SNAP, and Medicaid generally see increased enrollment as more people qualify due to lower incomes and higher unemployment. In a trough, these rates may stabilize or continue to grow until recovery kicks in. During an expansion, as the economy improves, unemployment rates drop and incomes rise, which typically leads to a decrease in enrollment in these programs. At the peak, program enrollments tend to be lower but may begin increasing if unemployment starts to rise due to economic overheating.