Question

what would happen to the interest rate price level, GDP and unemployment if credit cards become less available?

Answer 1

• credit card has become the immense and most important part of a human being's life. it provides better facilities concerned with postpone of actual expenditure to liquidity
• credit card- credit card is considered as a postpaid card where a person can shop,utilize service ,make payments and after availing benefits a person can pay later.it is a service which means 'use now pay later'

if in the economy the credit card is made less available then there would be some serious and adverse crisis in the economy, various online websites and many businesses would be face selling crisis.few impact we can study below-

• IMPACT ON PRICE LEVEL-

in economy the general price level would be affected. in the present time most people are depending on credit cards and now a days credit cards provides EMI facilities(both interest and no cost EMI),which makes people with low income to shop more and pay in the easy installments, but suppose if there are credit card is with limited people then people will curtail their spending as a result demand would be less than supply and due to this ultimately the prices would come down in near future.

• IMPACT ON GDP-

as stated earlier that the demand would be less and thus the supply would be comparatively higher in the economy then the producers would decrease their production level and as a result the production of final goods and services would be decreased in the economy and GDP ( gross domestic product) of the economy would be adversely affected.

• IMPACT ON UNEMPLOYMENT-

when people would demand less then the producer would stop there production as a result there would be an increase in unemployment and people will start losing their jobs and economy would be in the trend of VICIOUS circle of poverty.

• IMPACT ON INTEREST RATE-

all the above stated points would create a burden over government because government would be facing a situation a recession in the economy , banks revenue would be down, due to increase in unemployment the probability of NPA would be high, therefore it would become essential to increase the public spending as a result the income of the person would increase and banks have to encourage producers,as a result banks have to decline their interest rates so production sector can start their production and thus interest would be declined.