A Microcomputer Program That Simulates the Baumol-Tobin Transactions Demand for Money

The Baumol-Tobin approach for explaining the transactions demand for money has become standard in upper-division macroeconomic courses and is even used in many principles courses. This article describes a microcomputer program that permits students to learn the theory by experimenting with cash-management techniques. Suggestions are given for incorporating the technique into a course.