Lydia is a senior in high school. she works 20 hours a week at a popular clothing store. she is trying to save as much money as possible for her college tuition. however, she has to buy a dress for prom, pay her car insurance, and get a birthday gift for her sister. this week she received a $400 paycheck. she wants to deposit the entire check in her savings account for her college tuition, but she stops herself. she decides instead to put $100 in the bank, spend $200 for her prom dress, pay $80 for her car insurance, and buy her little sister a $20 birthday gift. while shopping, she sees a doll worth $21, which she thinks her sister will absolutely love. as a result, she decided to buy the more expensive doll and spend less on her dress. what is lydia’s scarce resource?

Money

Explanation:

In this case, Lydia does not have enough money to buy a birthday present for her sister, pay her car insurance and buy herself a prom dress. Money is always a scarce resource, and in this case she is $1 short. She could get the money from her bank account but that would lower her savings for college. Money for college is also scarce.

a) fewer loans to ensure they do not run low on reserves

Explanation:

The federal fund rate is the rate at which banks do loans between them.

They do this because Bank has the obligation by the law of keeping a part certain level of reserves. If their reserves are low, then a bank will borrow from another bank with a surplus to balance.

At more loans the bank gives, the ratio between bank reserved vs money loaned decrease Because it uses a portion of his reserve to loan money.

When the federal fund rate increase the banks will try to ensure they do not run low on reserves because the cost of borrowing from another bank went higher.