Why would the policy cause an increase in the labor supply


Problem

Suppose day-care centers charge working parents for each hour their children spend at the centers (no fixed costs of care). Suppose, too, that the federal government passes subsidy legislation so that the hourly cost per child now borne by the parents is cut in half. Would this policy cause an increase in the labor supply of parents with small children?

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Macroeconomics: Why would the policy cause an increase in the labor supply
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