TRUE or FALSE

1. [3] How much of a foundation grant is used to increase education spending depends in part on the price elasticity of demand. 2. [3] According to Oreopoulous and Salvanes (2011), people are more likely to report they are happy with their life, the more years of schooling they have had, but if they control for income (higher educated people earn more income, on average), the relationship disappears. 3. [3] Primary and secondary education is the largest spending category for state and local governments. 4. [3] Suppose the State of Mizzou is provided a categorical matching grant for Medicaid, where the match is $0.60 per $1.00 spent on Medicaid. The tax price for $1.00 of addition Medicaid spending would then be $0.625. 5. [3] Suppose a lump sum categorical grant for Medicaid is provided that is exactly equal to the expenditure on Medicaid under the matching grant (from question 4). That is, if they wanted to, they could spend the same amount on Medicaid with the lump sum grant as with the matching grant. Social welfare will be higher in the lump sum case than in the matching grants case. 6. [3] Suppose transportation spending for the State of Mizzou was $30 million. If a categorical block grant is issued to Mizzou for $5 million in transportation funds, we would expect transportation spending in Mizzou to increase to $35 million. 7. [3] The "fly paper effect" suggests that if the State of Mizzou were provided with a general grant of $2 million, government spending (G) would increase by $2 million. That is, none of the money would be used to lower taxes. 8. [3] The state Guaranteed Tax Base (GTB) formula for education ensures that local spending on education will be equalized across localities within the state