Actual GDP in a country is estimated to be 10% below potential GDP. Prices are virtually unchanged from one year ago. Unemployment is 12% of the labor force (much higher than the natural rate of unemployment). Which of the following policies would be the most appropriate for improving these economic conditions?
A. Increases in reserve requirements on deposits at commercial banks.
B. Reductions in federal debt.
C. Increases in corporate and personal income taxes.
D. Decreases in interest rates by the central bank.