The correct answer is:
Straining the nation's production capacities and creating an unfavorable balance of trade.
Since the factories that could have been producing consumer goods were being used to make items from the military, an imbalance in the industrial sector was created. In addition, the enormous spending on the war in Vietnam provoked an increasingly unfavorable balance of trade, which added to an international monetary crisis and menace to U.S. gold reserves in 1967-68. Furthermore, military expenses, coupled with domestic social spending, generated budget deficits which fueled inflation.