3. The state of Minnegan is considering two alternative methods of funding local road construction, matching grants and block grants. In the case of the matching grant, Minnegan will spend $1 for every $1 spent by localities.
a. What is the price of an additional dollar of local spending in each case?
b. Which of the two methods do you think would lead to higher levels of local spending on roads? Explain your answer.
This question was asked on Apr 21, 2010.
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