As tax rebate is aimed to benefit low- income earners they are more likely to spend increase in income on consumption rather than saving. As seen in year 2001 tax rebate increased consumption by 0. 8% in the first quarter and 0. 6% in year 2002. 3. Economic implication of the policy The policy make good economic sense since it is aimed at stimulating demand. Increase in disposable income held by the household will cause aggregate demand to increase which in turn forces supplies to increase output to meet the growing demand.
Supplies will require additional input in term of labour, material and capital which leads to more employment and economic growth (Poole, 1998). 4- Choices to make with $ 1,000 tax refund – Investment – there are various ways to invest such fund where some amount can be invested in shares, bond market or real property. In addition such amount can be used to set up a small business or invested in a mutual fund.
Saving – this amount can be saved in fixed deposit account or other saving account held in financial institution for contingency purposes or future investment and consumption. – Consumption – this amount may be used for present consumption among the various goods. – Clearing of debt- this amount can also be used to clear any outstanding debt held by individual. – taking insurance policy- there are various policy which can benefit an individual or his beneficiary at a future date such as personal accident cover, life insurance policy, education covers etc.
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