Question: Please can you help me answer the following question (B1-2), (3) FH =M + D + ED*, where M is currency holdings, and D (respectively,

Please can you help me answer the following question (B1-2),

(3) FH =M + D + ED*, where M is currency holdings, and D (respectively, D*) domestic (respectively, foreign) bank deposits. Equivalently The demand for deposits is (4) D/M = v(i), where i is the interest rate on domestic deposits, and v' > 0. The deposit ratio depends on the interest rate differential: (5) E.D*/D = x(iD - iw), where i is the interest rate on foreign deposits, and x' 0. Investment, I, is financed by bank loans and is defined as (2) I = I(it), where i is the loan rate and I'

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