Increasing Taxes to reduce AD may cause disincentives to work, if this occurs there will be a fall in productivity and AS could fall. Also, the increased working time along causes much grudge among working adults.
Example
France
Over fierce protests, the government has increased the retirement age from 60 to 62, raised the sales tax from 5.5 to 7% on non-essential products, cut tax breaks to the wealthy and corporations, and reduced regional and local government budgets. For the next two years, two state workers have to retire before one is replaced.
Over fierce protests, the government has increased the retirement age from 60 to 62, raised the sales tax from 5.5 to 7% on non-essential products, cut tax breaks to the wealthy and corporations, and reduced regional and local government budgets. For the next two years, two state workers have to retire before one is replaced.