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Question

Distinguish between stocks and flows. Given an example of each.


Solution

 Stocks
 Flows
 Stock relates to a point of time.
 Flow relates to a period of time.
 Stock is not time dimensional.
 Flow is time dimensional as per hour, per month, per year.
 Stock influences the flow. Greater the glow of capital, greater is the flow of goods and services.
 Flow influences the stock. For example: monthly increase in the supply of money leads to an increase in the quantity of money.
 Example: Wealth, capital, etc.
 Example: Income, capital formation.

Economics

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