Question: Please can you help me answer the following question, Using equations (3), (4), and (5) (BELOW), and assuming that D*0 = 0, solve for the

 Please can you help me answer the following question, Using equations(3), (4), and (5) (BELOW), and assuming that D*0 = 0, solve

Please can you help me answer the following question,

Using equations (3), (4), and (5) (BELOW), and assuming that D*0 = 0, solve for the foreign currency value of the demand for foreign deposits as a function D*() of the price of the domestic good, PD , the real exchange rate, z = E/PD , the domestic deposit rate, iD , and the world interest rate, iW.

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for the foreign currency value of the demand for foreign deposits asa function D*() of the price of the domestic good, PD ,

Consider a small open economy producing a (composite) good which is an imperfect substitute for a foreign good. There are five categories of agents: firms, households, commercial banks, the central bank, and the government. The world price of the foreign good is taken as exogenous and normalized to unity. The nominal exchange rate, E, is flexible. The supply of the domestic good is given by (1) YS = YS(PD), where PD is the price of the domestic good and YS' = dys/dPD > 0. Investment, I, is financed by bank loans and is defined as (2) I = I(it), where i is the loan rate and I' 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'

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