An example of an adverse selection problem in the context of obtaining a loan would be: Those individuals who are more likely to default turn out to be first in line for a loan, while the most trusthworthy individuals select themselves out of the market for a loan. An untrustworthy person who decides to save money at a specific bank. An untrustworthy individual who offers to lend money to a bank. A potential borrower not disclosing information conerning the risk or their project which would have otherwise lead the bank to not lend the money. QUESTION 2 Consider the market for loanable funds. Suppose the demand for loans is given by i= 100-3Q+, and the supply of loans is given by i= -20+Q+, where represents inflation. In the case of =5, what is the equilbrium quantity of loans and what is the corresponsing interest rate? Q*=30, i*=5 Q*=30, i*=15 Q*=35, i*=10 Q*=35, i*=2 QUESTION 3 Consider the market for loanable funds. Suppose the demand for loans is given by i= 100-3Q+, and the supply of loans is given by i= -20+Q+, where represents inflation. In the case of =5, what is the real interest rate? r=10 r=2 r=-2 r= -10 QUESTION 4 In general, when there is less competition in the banking sector ( a lower supply of firms), nominal interests rates decrease, which makes it easier for business owners to obtain a loan. inflation decreases, which is better for the economy as a whole. nominal interest rates increase, which is good for businesses. nominal interest rates increase, making it more difficult for business owners to obtain loans, which is bad for the economy as a whole