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Sir in the lectures you calculate the avg interest earned on the current account. I thought once you deposited money for it to earn interest, you couldn’t take it out unless the duration is complete but in the lecture example we take out money throughout the year yet we are earning interest on the bank balance that is left after we take out the money.
It is true that some deposit accounts are for a fixed term. However there are other ‘savings’ accounts that can be added to or taken from on a day-to-day basis, and Baumol assumes that this is the case.
Having said that, Baumol is not really very practical in most cases (which is why, although it can be asked, it is rarely asked in the exam 🙂 )
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