--%>
Assignment Help - homework help

Problem on Infrastructure

The state legislature has voted to develop a grant-in-aid policy to try and induce local communities to devote more resources to improving their infrastructure.

Town O = Has an operating budget of $2 million; currently spends a total of $60,000 on infrastructure
Town M = Has an operating budget of $1 million; currently spends a total of $10,000 on infrastructure

Assume that for each community:

• The price for a unit of infrastructure (I) = $1
• The price for a unit of any other good (AOG) = $1

The state is considering is providing each community with a $40,000 non-matching, categorical grant that can be used only for infrastructure. Predict how this grant would affect the total amount of money Town O spends on infrastructure. 

In your answer, be sure to show in a clearly labeled diagram for Town O only: (a) the original budget line (without grant); (b) the original spending on infrastructure and AOGs without grant; (c) the new budget line (with grant); (d) the range of plausible values for Town O’s spending on infrastructure after the grant.

   Related Questions in Business Economics

  • Q : Speculators decreases price volatility

    Speculators decrease price volatility through, in effect, changing demand curves: (w) out at low prices, and shifting supply curves out at high prices. (x) out at low prices, and shifting supply curves within at low p

    		•
  • Q : How will the system accommodate change

    How will the system accommodate change?

    		•
  • Q : Government expenditures on goods and

    Explain Government expenditures on goods and services and transfer payments?

    		•
  • Q : Problem on opportunity cost buying a

    After agonizing regarding whether to buy a hot dog or a hamburger along with his last dollar while he goes to the fair, Jeeter at last chooses the hot dog. The hamburger shows Jeeter's: (i) normative choice, because it would be more nutritious. (ii) opportunity cost o

    		•
  • Q : Nature and Scope of Economics Nature

    Nature and Scope of Economics: Introduction Economics is a social science that

    		•
  • Q : Formally adopt inflation targeting

    Question: Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment? Answer:

  • Q : Describe World Trade Organization

    Describe World Trade Organization (WTO)?

    		•
  • Q : Meaning of invisible hand according to

    Adam Smith’s opinion of an “invisible hand” powerfully implies the meaning that: (w) pursuit of individual self interest must be controlled. (x) most people lose sight of what’s good for society. (y) most peopl

    		•
  • Q : Significant that economics is not a

    Why is it significant that economics is not a laboratory science?  What problems may be evolved in deriving and applying economic principles?

    		•
  • Q : Economic bailout of Spain and Greece

    Question: Conduct an analysis on the following topic and prepare an Executive Summary-style report with supporting exhibits (Insightful Graphs, tables etc. from quality expert analyst references used to write the r

    		•