what is the difference between stock and flow?
Answers
Answer:
A flow is a quantity which is measured with reference to a period of time. Thus, flows are defined with reference to a specific period (length of time), e.g., hours, days, weeks, months or years. It has time dimension. National income is a flow. It describes and measures flow of goods and services which become available to a country during a year.
Similarly, all other economic variables which have time dimension, i.e., whose magnitude can be measured over a period of time are called flow variables. For instance, income of a person is a flow which is earned during a week or a month or any other period. Likewise, investment (i.e., addition to the stock of capital) is a flow as it pertains to a period of time.
Other examples of flows are: expenditure, savings, depreciation, interest, exports, imports, change in inventories (not mere inventories), change in money supply, lending, borrowing, rent, profit, etc. because magnitude (size) of all these are measured over a period of time.
(b) Stock Variables:
A stock is a quantity which is measurable at a particular point of time, e.g., 4 p.m., 1st January, Monday, 2010, etc. Capital is a stock variable. On a particular date (say, 1st April, 2011), a country owns and commands stock of machines, buildings, accessories, raw materials, etc. It is stock of capital. Like a balance-sheet, a stock has a reference to a particular date on which it shows stock position. Clearly, a stock has no time dimension (length of time) as against a flow which has time dimension.
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stock is measured at one specific time, and represents a quantity existing at that point in time ( which may have accumulated in the past. A flow variable is measured over an interval of time. Therefore, a flow would be measured per unit of time (say a year).
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