An increase in government expenditure financed by an equivalent
increase in taxes will, apart from any effect on employment,
1. have a positive effect on wealth if the
government is producing goods that the private sector would not produce.
2. not affect wealth if the social benefits of
the increased goods and services made available by the government equal
the value to taxpayers of the goods that could be bought with the funds
that are taxed away.
3. do both of the above.
4. do neither of the above.
Choose the correct option.