The identical citizen of Terrytown have $200,000 to spend on either road maintenance (R) or private goods (C). Aggregate preferences within Terrytown over Rand C are given by: u(RC) = RC a. If Terrytown maximizes the aggregate utility function above, how much spending on road maintenance will be provided? Suppose the federal government provides Terrytown with a very generous matching grant. They provide $2 of road maintenance for every $1 that Terrytown spends (2 for 1 matching grant). b. Write down the budget constraint under this matching grant c. Solve mathematically for the revised spending on road maintenance and the total size of the grant. d. Is this increased spending a result of the income effect, substitution effect, or both? Explain. The identical citizen of Terrytown have $200,000 to spend on either road maintenance (R) or private goods (C). Aggregate preferences within Terrytown over Rand C are given by: u(RC) = RC a. If Terrytown maximizes the aggregate utility function above, how much spending on road maintenance will be provided? Suppose the federal government provides Terrytown with a very generous matching grant. They provide $2 of road maintenance for every $1 that Terrytown spends (2 for 1 matching grant). b. Write down the budget constraint under this matching grant c. Solve mathematically for the revised spending on road maintenance and the total size of the grant. d. Is this increased spending a result of the income effect, substitution effect, or both? Explain