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The amount of money that households have available for spending and saving after income taxes have been accounted for.
Expansion of credit
Decrease in Production
When there is shortage of factors of production like labour, capital, raw materials, etc. there is bound to be reduction in the production of goods and services.
In countries where trade unions are powerful, they resort to strikes and lock-outs which resulted in a fall in industrial production thereby reducing the supply of goods.
Natural calamities like droughts, floods, etc. adversely affects the supplies of agricultural products. This creates shortage of food products and raw materials, thereby helping inflationary pressures.
Reduces saving capacity Debtor benefit Adversely affects exports & balance of payments Increases disparities in income Investments are encouraged Capital gains on sale of property and shares
To cut personal consumption expenditure, the rates of personal, corporate and commodity taxes should be raised and even new taxes should be levied, but the rates of taxes should not be too high as to discourage saving, investment and production.