Editing Block grant (section)

== Graphical representation ==
[[File:Impact_of_Block_Grant_on_Budget_Constraint.png|thumb|When Town A is offered a block grant of $375,000, the budget constraint shifts outwards from AB to CD. Town A chooses point Y on CD, as it spends $75,000 more on education and $300,000 more on private goods.]]

The figure demonstrates the impact of an education block grant on a town's budget constraint. According to microeconomic theory, the grant shifts the town's budget constraint outwards, enabling the town to spend more on both education and other goods, due to the [[Income Effect|income effect.]] While this increases the town's utility, it does not maximize the town's spending on education. Therefore, if the goal of a grant program is to encourage spending on a particular good, a categorical grant may be more effective in achieving this goal than a block grant, as most block grant critics would argue.<ref>{{Cite book|title=Public Finance and Public Policy|url=https://archive.org/details/publicfinancepub00grub|url-access=limited|last=Gruber|first=Jonathan|publisher=Worth Publishers|year=2015|isbn=978-0470563588|pages=[https://archive.org/details/publicfinancepub00grub/page/n333 294]}}</ref>