Question

The United States entered the “Great Recession” in late-2007. The recession officially ended in 2009, but...

The United States entered the “Great Recession” in late-2007. The recession officially ended in 2009, but the U.S. economy remained weak through 2012. Do you think social insurance programs play a larger consumption smoothing role during recessionary or non-recessionary periods? Why?

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Answer #1

Social insurance programs play a larger consumption smoothing role during recessionary periods because it ensures the citizens to follow the regular standard of living at the critical times. If there is no social insurance at those times, then the consumption will face a severe attack and GDP will fall eventually. It also helps the people to gradually face the recession period and overcome the same. During non-recessionary periods, it act as a support to the unemployment people and diability people. But during the recession period only, it helps maximum consumption smoothing.

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