SWEDEN BY BEN DAVIDSON, EUGENE THONG, JESSIE YEUN, AMY CHIN AND JOSIE TUFF

DEMAND SIDE POLICY The purpose of a demand side policy is to boost a country’s aggregate demand. Demand side policies can be put into affect when a country is experiencing below trend growth or a recession. They can be used to improve the economic growth rate if there is a negative output gap. If the economy has a positive output, an increase in aggregate demand could cause inflation, as a result side policies would not be necessary in this case.

THE ROLE OF DEMAND SIDE POLICIES IN SWEDEN: In 2014, Sweden’s economy was able to pick up the pace with the support of effective macroeconomic policies. With the rise of unemployment, household debt, and Sweden’s banking structure being considerably big, the risk of financial instability has become a growing concern. In order to fortify the banks capital, policies have been brought in as a method of support. These policies aim to eliminate tax incentives that postpone mortgage repayment and focus on housing supply limitations. Inflation in Sweden is low as a result of domestic and external circumstances. Monetary policy has been implemented with the intention of addressing this matter and restoring financial balance. Not a lot has been done to diminish financial vulnerabilities, which has meant that monetary policy has not had much to work with. Consequently, a less supportive policy course may take place through short-term macroeconomics circumstances. A policy rate cut made in July is expected to tackle low inflation.

INFLATION What is inflation? According to (Riksbank.se, 2011), inflation can be defined as an increase in the general price level of goods and services. Factors that cause inflation to arise could be due to the central bank increasing the supply of money, increase in consumer demand in goods and services and increase in employee demand to increase in wages which would lead to an increase in the price of goods and services. Inflation rate Currently, the inflation rate of Sweden is at 0.4% at the time of February The central bank target would be at 2 percent This tells us that the general price level of goods and services is increasing at a lower rate compared to the central bank. As a result, this may allow consumers in Sweden to have a higher disposable income provided that their salary had increased higher than the inflation rate. Consumers can also be seen as better off as more goods and services becomes affordable or retaining more of their income which they can save or purchase more goods. However, such low inflation rate may be unhealthy as this may lead to deflation where the price of goods and services fall. This is because consumers would hold their purchases till prices fall and companies/ investor would hold their investment. Deflation can be a hard process to break.

ECONOMIC GROWTH Economic Growth is where there is an increase in the GDP of an economy. GDP measures the total value of goods and services produced in an economy. Sweden had seen a great growth in their GDP which indicates that more goods and services are being produced in the economy. When looking at the seasonally adjusted basics, Sweden economic growth may be due to increase in household consumption of 0.9, increase in exports by 2.9%. Production of goods and services in Sweden had also increased by 1.4 percent in which production of goods increase by 1.6 percent and services had increased in 1.2 percent. (Tradingeconomics.com, 2016) In conclusion, Sweden may see a further increase in economic growth due to increase in consumption and production of goods and services. However, the inflation rate may not be in a favourable position as it is well below the Swedish central bank inflation target which may cause some problems if these were not to be tackled. The Sweden bank may attempt to implement monetary policies where the main objective would be to tackle the current inflation rate while still supporting or further improve economic growth.

UNEMPLOYMENT

SHORT-TERM

LONG-TERM

SWEDEN GOVERNMENT POLICIES What is government spending? Government Spending refers to public expenditure on goods and services and is a major component of the GDP. (Trading Economics, 2016) What is GDP? The gross domestic product (GDP) measures of national income and output for a given country's economy How does government spending affect Economic Growth? Government spending policies like setting up budget targets, adjusting taxation, increasing public expenditure and public works are very effective tools in influencing economic growth (Trading Economics, 2016)

TAXATION Sweden is known for its high taxation(Personal taxation is 57% ) to fund the government spending budget of Swedish krona The main purpose of tax policy is to fund common welfare, various public services and other public expenditure. Tax policy should also create conditions for: Sustainable growth and high employment, fairly distributed welfare, and an environmentally and socially sustainable society.

GOVERNMENT DEBT

REFERENCES Riksbank.se. (2011). What is inflation?. [online] Available at: is-inflation/ [Accessed 5 Apr. 2016]. Tradingeconomics.com. (2016). Sweden Inflation Rate | | Data | Chart | Calendar | Forecast. [online] Available at: [Accessed 5 Apr. 2016]. Data.worldbank.org. (2016). GDP growth (annual %) | Data | Graph. [online] Available at: [Accessed 5 Apr. 2016]. Tradingeconomics.com. (2016). Sweden GDP Growth Rate | | Data | Chart | Calendar | Forecast. [online] Available at: [Accessed 5 Apr. 2016]. Sweden Goverment Spending. (2016). Retrieved from Trading Economics: Trading Economics. (2016). Retrieved from Goverrment Spending: