1. Consider the Baumol-Tobin model. The fixed cost for each trip to the bank is F, interest rate is i, and the income (therefore expenditure) for the household is Y. We know that the optimal number of trips to the bank is given by N * N*= (* (a) Show that the optimal average cash holding is given by C = (F)12. (b) How does the optimal cash holding relate to interest rate i and income Y? (c) The elasticity of cash holding with respect to interest rate is defined as (--(.) () where is the partial derivative of cash holding with respect to interest rate, and is given by = -1 (EF) 12 (2). Show that = 1/2. 2