When a country faces low economic growth and low inflation, and the central bank has already lowered interest rates to near zero, the economy may be in a liquidity trap where monetary policy has limited effectiveness. In such a scenario, expansionary fiscal policy is needed to complement monetary policy and stimulate demand. Increasing government spending on infrastructure projects:

• Provides a direct boost to aggregate demand.
• Creates jobs and income, leading to higher consumption and investment.
• Has a multiplier effect on the economy, which can support growth and inflation.

A is incorrect: This is contractionary fiscal policy, which would further suppress demand and economic growth, counteracting the central bank’s effort
B is incorrect: Reducing transfers decreases disposable income for consumers, particularly for low-income households who are more likely to spend it, further weakening demand.
D is incorrect: Keeping spending constant does not provide the additional fiscal stimulus required to complement the central bank’s near-zero interest rate policy.