Stocks and flows

A stock is an amount measured at a particular point in time. Total accumulated saving on a specified date, such as 31 March, is the balance built up until that date and is therefore a stock. Saving made during a month or year is a flow because it covers a period. A saving rate is a ratio, not a stock. Hence, D is correct.

Loan outstanding means the amount still unpaid on a specified date. Since it is measured at one point in time, it is a stock. New loans given during the year are credit transactions occurring over a period, so their total is a flow. The first item is therefore a stock and the second is a flow, making option B correct.

Population on a specified date is the number of people present at one point in time, so it is a stock variable. Deaths during a year are events counted over an interval of time, so the number of deaths is a flow variable. The correct sequence is therefore stock followed by flow, which is stated in option C.

The opening cash balance is the amount available at the beginning of the day, so it is measured at a point in time and is a stock. Cash sales during the day are transactions accumulated over a time period and are therefore a flow. Consequently, the correct classification is stock followed by flow, as shown in option A.

National wealth is the total value of assets owned by a nation at a particular point in time, making it a stock. Domestic product measures the value of goods and services produced during a year, making it a flow. Therefore, option B gives the correct order.

The stock of goods at the end of the month is inventory available on a particular date, so it is a stock variable. Purchases made during the month are transactions occurring over a time interval, so their total is a flow variable. Thus, the two quantities are correctly classified as stock and flow, respectively, making option D correct.

Interest earned during the year is measured over a definite period, so it is a flow variable. It records income generated throughout the year. Bank balance, capital on a date, and month-end stock are measured at particular points in time and are therefore stock variables. The time reference, not the monetary form, determines the classification.

Cash balance on a particular date is measured at one specific point in time, so it is a stock variable. It shows the amount held at that moment. Annual income, monthly sales, and weekly output are measured over periods and are consequently flow variables. Words such as ‘on a date’ are a useful clue for identifying a stock.

Imports during a year record transactions occurring throughout a period, so imports are a flow. Imported goods stored at a port on a particular day represent an inventory existing at one point in time, so they are a stock. Thus, option A gives the correct order. The words ‘during a year’ and ‘on a day’ provide the decisive clues.

Annual wage payment is measured over the course of a year, so it is a flow. Wages payable outstanding on a particular date are an unpaid balance existing at that moment, so they are a stock. Therefore, the correct order is flow and stock. A period measure and a point-in-time balance must not be confused merely because both are expressed in money.

A car owned at the end of the year is an asset measured at a particular point in time, so it is a stock. Fuel expenditure during the year is accumulated over a period, so it is a flow. Hence the correct order is stock and flow. The classification depends on when the amount is measured, not simply on whether it is a physical good or an expense.

The total number of unemployed persons on a specified date is a stock because it measures a condition at one point in time. New unemployment during a month is a flow because it counts additions occurring throughout that month. Thus, the correct order is stock and flow. The distinction is based on the date-versus-period reference, not on the subject of employment itself.

Sales revenue is earned through sales made over a period such as a month or year, so it is a flow. Accounts receivable on a particular date is the outstanding amount owed by customers at that moment, so it is a stock. Hence option B is correct. The fact that both appear in business accounts does not make them the same type of variable.

‘Rupees per year’ explicitly refers to an amount measured with respect to a period, so it indicates a flow. A flow records a rate or total movement over time. By contrast, rupees on a date, at present, or at year end refer to a balance at a point in time and therefore indicate a stock. The time unit is decisive.

Cash available now is measured at the present moment, so it is a stock. It indicates the balance currently held rather than an amount accumulated over a stated period. Monthly expenditure, annual income, and weekly production are all measured during periods and are therefore flows. Words such as ‘now’ and ‘on a date’ identify stock variables.

Tax revenue received during a year is measured over that year, so it is a flow. Tax arrears at year end represent the unpaid tax balance existing on a particular date, so they are a stock. Therefore, option A is correct. Revenue records a period’s receipts, whereas arrears record an outstanding amount at a point in time.

Population on a specified date is the number of people existing at one point in time, so it is a stock. Calling it a flow is the mistake described in option D. Income, investment, and depreciation are measured over periods and are therefore flows. The key test is whether the quantity is a level at a date or an activity during an interval.

Annual exports are the value of transactions completed over a year, so exports are a flow. Foreign currency balance at year end is the amount held at a specific point in time, so it is a stock. Therefore, option A gives the correct order. A year-end balance should not be confused with the currency transactions that occurred during the year.

A stock is measured at a particular point in time, such as capital on 31 March. A flow is measured over a period, such as income earned during a year. Thus, option C gives the best rule. The subject matter or size of a figure does not decide its classification; the relevant time reference does.

Advertising expenditure is measured over the entire year, so it is a flow variable. The advertising material remaining at the end of the year is measured at one particular point in time and represents inventory, so it is a stock variable. Therefore, option B correctly gives the order: flow and stock.

Capital formation means the addition to capital made during a specified period, such as a year. Because it is measured over time, it is a flow variable. Capital stock means the total capital existing at a particular point, such as the beginning of the year, so it is a stock variable. Therefore, the correct order is flow and stock.

A tax liability reported on a particular date is an outstanding amount existing at that point of time, so it is a stock. Tax payment made during a year is measured over the entire year, so it is a flow. The wording “on a date” identifies a stock, while “during the year” identifies a flow. Hence, option A is correct.

Finished goods available on the closing date represent the firm's inventory at one specific point in time. A quantity measured at a date is a stock variable. Production and sales, by contrast, are normally measured over a period such as a month or year and are flow variables. Therefore, option B is correct.

Inventory held at a particular date is a stock because it is measured at one point in time. However, the net increase in inventory during a year records a change over a period. Such a change, often called inventory investment, is a flow variable. The phrase “during the year” makes option C the correct answer.

Public debt is the accumulated outstanding borrowing of the government at a particular date, so it is a stock variable. Fiscal deficit measures the excess of government expenditure over receipts during a financial year, so it is a flow variable. A flow such as the fiscal deficit can add to the stock of public debt. Therefore, option C is correct.