Q1. "Soft Selling" and Adverse Selection soft selling occurs when a buyer is skeptical of the quality or usefulness of a product or service. For example, suppose you're trying to sell a company a new accounting system that will reduce costs by 10%. Instead of asking for a price, you offer to give them the product in exchange for 50% of their cost savings. Describe the information symmetry, the adverse selection problem, and why soft selling is a successful signal.
Q2. A small open economy with a floating exchange rate is in recession with balanced trade. If policymakers want to reach full employment while maintaining balanced trade, what combination of monetary and fiscal policy should they use?