Instead of the matching grant in the first problem, suppose Central City received a lump-sum grant of

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Instead of the matching grant in the first problem, suppose Central City received a lump-sum grant of $55,000 that must be spent on public safety. If the total income of Central City residents is $22 million, and the income elasticity of demand for public safety is 0.8, what is the expected effect of this grant on spending and taxes for public safety? Why does the matching grant increase spending more than the lump-sum grant?

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