http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10796624
a) This article talks about how the revenue received from taxes in New Zealand was less that expected. The New Zealand Government over-estimated this amount and thus its expenditures were too high leading to an increase in their operating deficit. The gross debt of New Zealand is $75.78 million, equating to 37% of the GDP.
b) The article relates to the statistics we found earlier in the year as it discusses the relationship between Government debt and GDP.
c) National debt is a very complex issue with no easy solution. Obviously the Government needs to increase its revenue and decrease overall spending. The government could increase taxes to try to solve this problem. However, increasing taxes will decrease the income of individual household which will shift the demand curve for almost all goods to the left, meaning that there will be a decrease in quantity for every market. This means that producers need to produce less and need less labor. This could lead to higher unemployment which will mean that there are more citizens who need government assistance, thus increasing government expenditures. A viscous cycle indeed.
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