Suppose the government were to provide a $2-per-hour subsidy for families with an employed mother who purchases child care.
a. Consider a mother with a preschool-age child who is currently not employed. How would this subsidy affect her decision to work, all else equal?*
b. Consider a mother with a preschool-age child who is currently employed. How would this subsidy affect the number of hours that she chooses to work (assuming she can vary them), all else equal?*