During the Great Depression the US government believed that deflation was caused by a collapse in the prices of stock and other assets, reducing the levels of wealth and confidence. The diagrams show two approaches to counter deflation. [Figure 30.1] Given this belief, which policy should the US government have used, in an attempt to remove the deflation and which diagram represents the intended outcome of the policy? policy | intended outcome ---|--- A decrease interest rates | diagram Y B reduce corporation tax | diagram Z C increase interest rates | diagram Z D reduce corporation tax | diagram Y

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