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Deluded is to trick or to mislead the mind: “It is very sad that the politicians in this country are constantly trying to delude the populace.”

Diluted is to reduce the strength of something or to make thin by adding a substance: “The bar is in the habit of serving diluted alcohol and making a fool out of its customers.”

I was deluded into believing that the diluted sauce would taste as good as the original recipe.

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