According to Baumol, cash balances are kept to:

CA Foundation · Business Economics · MTP · September 2025
According to Baumol, cash balances are kept to:
(A) A. Invest in stock
(B) B. Earn capital gains
(C) C. Minimize total transaction cost
(D) D. Hedge inflation

Suggested Answer and Working Notes:

Correct Answer: Option (C)

C. Minimize total transaction cost

Topics: Money Market

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