BANKING AFFAIRS

Detailed explanation-1: -The resources that we value-time, money, labor, tools, land, and raw materials-exist in limited supply. There are simply never enough resources to meet all our needs and desires. This condition is known as scarcity. At any moment in time, there is a finite amount of resources available.

Detailed explanation-2: -Money is scarce because it is limited in supply. The Federal Reserve limits the supply of money so that it can be in a position to retain the value of money. Time is also scarce.

Detailed explanation-3: -Inflation means the amount of money needed to buy a good or service increases-therefore money becomes less valuable, and the same amount of money can buy less over time than it could in the past. It is therefore in a country’s best interest to keep its paper money supply relatively scarce.

Detailed explanation-4: -The scarcity principle is an economic theory in which a limited supply of a good-coupled with a high demand for that good-results in a mismatch between the desired supply and demand equilibrium.