Suppose you believe that the income elasticity of demand for state government services (measured by expenditures) is

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Suppose you believe that the income elasticity of demand for state government services (measured by expenditures) is on the order of .80. If state per capita income is expected to increase by 20 percent over the next three years, what is the expected effect on desired state spending? If the increase in income were the only economic change expected in these years (no inflation, population growth, or change in consumer preferences), what might be expected to happen to state spending as a percentage of state personal income?

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