The fiscal policy is increased in its effectiveness through the multiplier effect. Thus, the correct answer is option A.
The use of taxation and expenditure by the government to affect the economy is known as fiscal policy. Fiscal policy is often used by governments to encourage robust, long-term growth and to lower poverty.
To partially raise the amount of money flowing into the system, a government may reduce taxes or boost spending. Such fiscal policy have an multiplier effect. In other words, it is reasonable to anticipate that every $1 spent will result in an increase in the GDP of more than one dollar.
Thus, multiplier effect helps to increase the effectiveness of the fiscal policy.
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