A City That Is Currently Spending $1 Million on Policing

question 28

Multiple Choice

A city that is currently spending $1 million on policing receives a one-for-one matching grant of up to $2.5 million to spend on policing.Assume policing is a normal good,as are other programs paid for by the city.The income effect ___________; the substitution effect ___________.

• A) increases spending on non-policing programs; increases spending on policing
• B) increases spending on non-policing programs; decreases spending on policing
• C) increases spending on policing; does not affect spending on policing
• D) does not change spending on policing; increases spending on non-policing programs

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Definitions:

Asymmetric Information

A situation in markets where one party in a transaction has more or superior information compared to another.

Independent Agency

An independent agency is a governmental body designed to operate independently of political influence, often responsible for regulating certain aspects of the economy or society.

Safety Risks

Safety risks refer to potential sources of danger or harm that could result in injury or health hazards in various environments, including workplaces, homes, and public spaces.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a market balance.