Hayek believed that the economy could be hard to measure because:

• A. All economic activity is recorded accurately by government agencies.
• B. Information is dispersed among many individuals and cannot be centrally collected or processed efficiently.
• C. Prices always reflect the true value of goods and services.
• D. Markets operate only under perfect competition.

Answer: (B)

Verified step by step guidance

1. Understand the context of Hayek's economic theory, which emphasizes the role of information in the economy.
2. Recognize that Hayek argued the economy is difficult to measure because information is decentralized and dispersed among many individuals.
3. Note that this dispersed information cannot be efficiently collected or processed by a central authority, making centralized measurement challenging.
4. Contrast this with the incorrect options: government agencies do not record all economic activity accurately; prices may not always reflect true values; and markets do not operate only under perfect competition.
5. Conclude that the key insight is the decentralized nature of information, which limits the ability to measure the economy centrally.