Baumol’s Inventory Approach

Baumol’s Inventory Approach (Baumol-Tobin Model of
Cash Management)

Later economists further developed the Keynesian approach
to the demand for money. The transaction demand for money
according to them is also sensitive to interest rate.
The transaction demand for money arises because of the lack of
synchronization between receipts and payments. Hence, there is
a need to keep some money at hand to pay for the things we
buy.