Michael Vincent and Elizabeth Matthews, economists at Macro Associates, conduct research into the effects of fiscal policy on the economy. Vincent states that government taxing decisions affect the supply of labor. Matthews contends that government taxing decisions affect potential GDP. Regarding the statements made by Vincent and Matthews: Vincent Matthews（）①A. Correct Incorrect ②B. Incorrect Correct ③C. Correct Correct
A. ①
B. ②
C. ③
参考答案：C
解析：
Fiscal policy refers to the federal government’s decisions regarding government spending and taxing. Income tax increases cause after-tax wages to fall, dampening the incentive to work. Consequently, workers will be less likely to work the same number of hours as they did when their after-tax wages per hour were higher. As income taxes increase, the full-employment supply of labor (a key factor of production) decreases, which causes potential GDP to decrease. Therefore, government taxing decisions affect both the supply of labor and potential GDP.