Wk 4 - Apply: Signature Assignment: Government Intervention Analysis [due Mon]Wk 4 - Apply:...

Writea 700- to 1,050-word summary of your analysis. Identify the intervention and the market failure leading up to the intervention. Complete the following in your paper:

o Analyze the arguments for government intervention as opposed to arguments for market-based solutions.Hint:See the information about market failures.

o Examine who has been helped and who has been hurt by the selected government intervention.

o Examine externalities and unintended consequences of such intervention. For example, consider whether the SNAP program and health coverage for low-income families result in higher future tax revenues because low-income children grow up healthier and produce higher incomes over their lifetimes.

o Analyze whether cost of the intervention you selected as a share of GDP or the number of participants is increasing decreasing, or varies with the state of the economy, based on the cost trend(or number of participants) since its inception or since 2000.

o Analyze credible economists’ opinions on the success or failure of the intervention that you chose in achieving its objectives.

o Recommend whether the program should be continued as is, discontinued, or modified based on your conclusions. Defend your recommendation.

Note: Use of charts and graphs is encouraged with appropriate citations. Any charts or graphs retrieved from the Federal Reserve Bank of St. Louis FRED website may only be included when the data sources used by FRED are US government sources such as the Bureau of Economic Analysis or the Bureau of Labor Statistics.

Citeat least 2 academically credible sources.

Formatyour assignment according to APA guidelines.

Submit
your assignment.

eco535-week-4-tuc10hoi.docx

Komalavalli · Accepted Answer

Analyzing government intervention program of Unemployment insurance
Market failure occurs when a free market fails to efficiently allocate the resource in the production of goods and services. During great depression, financial crisis in the economy market failure occurred which led to lack of business activities, this led to rise in unemployment rate in the economy as a consequence of several people were forced suffer from poverty. During downturn time of business cycle government intervened in the labour market to address the issue of lack of income among individual with an increase in unemployment by providing unemployment insurance.
Unemployment insurance helped the individuals who are laid off during contraction phase of business cycle and burdened the tax payers to contribute the Federal Reserve funds.
Arslan, Degerli and Kabaş (2019) they discussed in their paper about Unintended Consequences of Unemployment Insurance Benefits. They found that Unemployment insurance on benefit side increases the consumer welfare through consumption smoothing while on the cost side policy of Unemployment insurance caused distortion effects on employment creation and job search in the economy. This resulted in lowering the liquidity available to banks which led to lower bank credit availability for firms, which led to reduction of investment by firms. Reduction in firm investment led to decrease the economic activity.
Our findings suggest that UI policies may have large negative macroeconomic implications via their effects on bank funding. Specifically, we show that firms may suffer from lower bank credit induced by generous UI policies and lower their investment in response.
Unemployment insurance is paid by the government to the people who lost their jobs due to fluctuations in business cycle. By social security Act in 1935 Federal unemployment insurance was created, which was a part of the process of economic integration in United States. This scheme was handled by both federal and state government. During crisis period when there is an increase in occurrence of unemployment, federal government plays an active role by granting loans to states and making direct transfers to the unemployed person.

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