14
QuizMultiple Choice

International Trade

Question 14 • IL-Economics

Why did Friedrich Hayek call expansionary spending dangerous?

Answer
A
He felt it could lower the money supply and cause deflation.
B
He felt it could lead to inflation and poor decisions by consumers.
C
He felt it could lead to deflation and poor decisions by consumers.
D
He felt it could lower available credit and cause a drop in prices.

Explanation

Hayek warned that expansionary spending could increase the money supply and drive inflation. Inflation can distort price signals, leading consumers and businesses to make poor decisions about what to buy or produce. So the best choice is that it could lead to inflation and poor decisions by consumers.

AI-written and checked against the verified answer.

Previous
Next