Edmund Jones, an economist, recommends that the federal government consider reducing its budget deficit during a recession by raising income taxes with no other fiscal policy changes. Jones’ income tax increase recommendation will most likely have the following effects on the supply of labor and on potential GDPSupply of labor Potential GDP（）①A. Decrease Decrease ②B. Decrease Increase ③C. Increase Decrease
A. ①
B. ②
C. ③
参考答案：A
解析：
Taxes dampen the incentive to work. An increase in income taxes causes after-tax wages per hour to fall. Consequently, workers will he less likely to work the same number of hours as they did when their after-tax wages per hour were higher. As income taxes rise, the full-employment supply of labor (a key factor of production) falls, which then causes the potential GDP (intersection of the supply and demand for labor curves) to fall.