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    Budget Emergency and Debt Cycle

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    I need help discussing and responding to two articles attached:
    1. Refers to the article: "YES, MR ABBOTT, THERE IS A BUDGET EMERGENCY" (attached). What is a "budget emergency"? Discuss the reasons why Australia has a "budget emergency".

    2. Refers to the 'Household debt locks Danes into vicious circle of decline' (attached). It described the Danish economy as being locked in a "vicious cycle of decline" due to household and government debts. What is a "vicious cycle of decline"? Why did Denmark experience this problem?

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    Solution Preview

    1. There is a budgetary emergency because the budget of Australia cannot be brought under control. The growth in total government spending beyond the budget period is estimated to be 3.5 percent more than inflation. The economic growth will remain below 3 percent leading to a situation that the government will consume an increasing share of the economy. If the coalition keeps the tax no more than 23.7 percent of GDP, then the budget will never return to surplus.

    There are several reasons for the budgetary emergency. There is $1.7 trillion of government spending that is the main cause of this emergency. The government is seeking to increase economic growth but there is no action to reduce costs. The largest areas of government spending are ...

    Solution Summary

    The answer to this problem explains the problem of debt cycle and budget emergency. The references related to the answer are also included.