C
Explanation:
Governments borrow by issuing bonds, which domestic or overseas individuals or entities (such as commercial or central banks) can purchase.
Choice A is incorrect because transfer payments only entail a redistribution of income. They do not directly increase demand for a nation’s goods or services.
Choice B is incorrect, as contractionary fiscal policy lowers inflation, making exports more competitive. Additionally, contractionary fiscal policy suppresses consumer spending, including spending on imports.
Choice D is incorrect, as fiscal policy can redistribute income by adjusting income tax and transfer payment policies.