Matching grants only result in income effects.

Question

Quizplus · Accepted Answer

Matching grants can have both income and substitution effects. The income effect comes from the increase in grant funds matching an increase in the recipient's own funds, leading to a total increase in available resources. The substitution effect can occur if the matching grant is tied to specific activities or conditions, leading the recipient to shift their behavior to meet those requirements, potentially resulting in a reduction of other activities or investments.

Matching Grants Only Result in Income Effects