According to the US Department of the Treasury, the American Rescue Plan recently passed by Congress includes the following provisions regarding child care

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According to the US Department of the Treasury, the American Rescue Plan recently passed by Congress includes the following provisions regarding child care.

1. “The credit amount has been increased. The American Rescue Plan increased the amount of the Child Tax Credit from $2,000 to $3,600 for children under age 6, and $3,000 for other children under age 18.
2. The credit’s scope has been expanded. Children 17 years old and younger, as opposed to 16 years old and younger, will now be covered by the Child Tax Credit.
3. Credit amounts will be made through advance payments during 2021. Individuals eligible for a 2021 Child Tax Credit will receive advance payments of the individual’s credit, which the IRS and the Bureau of the Fiscal Service will make through periodic payments from July 1, to December 31, 2021. This change will allow struggling families to receive financial assistance now, rather than waiting until the 2022 tax filing season to receive the Child Tax Credit benefit.
4. The credit is now fully refundable. By making the Child Tax Credit fully refundable, low- income households will be entitled to receive the full credit benefit, as significantly expanded and increased by the American Rescue Plan.
5. The credit is now extended to Puerto Rico and the U.S. Territories. For the first time, low- income families residing in Puerto Rico and the U.S. Territories will receive this vital financial assistance to better support their children’s development and health and educational attainment.”

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Please answer the following questions.

1. Suppose you are a single parent with at least one child eligible for child care support under the American Rescue Plan
   1. explain how your labor force participation might change (please discuss both income effects and substitution effects)?

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1. explain how your labor supply might change (please discuss both income effects and substitution effects)?

1. Suppose you are a member of a parenting household with at least one child eligible for child care support under the American Rescue Plan
   1. explain how your and your partner’s labor force participation might change (please discuss both income effects and substitution effects)?
   2. explain how your and your partner’s labor supply might change (please discuss both income effects and substitution effects)?