Question
To stimulate the economy, the federal government is offering municipalities $2 for every $1 spent on sewage treatment facilities (Y). Your municipality's budget is $1800.
To stimulate the economy, the federal government is offering municipalities $2 for every $1 spent on sewage treatment facilities (Y). Your municipality's budget is $1800. The price of Y is $180 and the price of X (non technology) is $60. Illustrate the impact of the grant on your municipality. Carefully draw the new budget line labelling all points of interest. How much better off (in utils) is your hometown? What dollar amount is your hometown receiving? If your hometown were given the same amount of cash without any conditions would it be better off than with the conditional grant? If so by how many Utils?
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