Stocks and flows

A stock is measured at a particular point of time, not over a period. Wealth represents the accumulated value of assets at a given date, while a bank balance shows money available on a specific date. Therefore, both wealth and bank balance are stocks. National income, investment, output, sales and consumption are generally flows because they are measured during a period.

The phrase “per day” expresses a quantity measured during a definite time period, namely one day. Such quantities are flow variables because they record activity occurring over time, for example daily income, daily production, or daily expenditure. A stock variable, in contrast, is measured at one particular point in time, such as wealth or inventory on a specific date. Therefore, option A is correct.

The defining difference is the time reference. A stock is measured at a particular point, such as wealth, money supply or inventory on a date. A flow is measured over a period, such as annual income, production, saving or expenditure. Therefore, option B gives the accurate general rule; the other statements incorrectly define these concepts.

Personal wealth is the accumulated value of assets owned by a person at a particular point in time. It may include property, financial assets and other possessions, after considering liabilities where appropriate. Since it is measured on a date rather than earned or recorded during a period, wealth is a stock. Income and expenditure are normally flows.

Salary received in one month is measured over the duration of that month, not at one isolated moment. It is therefore a flow variable. Income, wages, production, expenditure, and saving are generally flows when they are stated for a month, quarter, or year. A bank balance or capital stock would be measured at a particular date and would therefore be a stock. Hence, option B is correct.

The amount available in a bank account on a particular date is a balance measured at one point in time. It represents accumulated money available at that moment, so it is a stock variable. Deposits or withdrawals made during a month would be flows, but the closing balance on a date is a stock. Therefore, option B is correct.

Consumption expenditure made during a year is recorded over the complete time period of one year. It is therefore a flow variable. The amount may include spending on goods and services throughout that year, so it describes economic activity occurring over time. A stock, such as wealth, inventory, or money balance, is measured at a particular point in time. Thus, option B is the correct answer.

The population recorded on a particular date is the number of people present at one specified point in time. It is therefore a stock variable. The number of births, deaths or migrants during a year would be flows because those events are counted over a period. The date in the question clearly identifies population as a stock.

The number of births in a year counts events occurring throughout a twelve-month period. A quantity measured over such an interval is a flow variable. It is different from the population on a particular date, which is a stock. Thus the annual time reference and the activity of births make option B correct.

Machines are durable productive assets owned and used by a factory. Their total quantity measured on one day is the capital stock, because it is observed at a particular point in time. Expenditure on purchasing machines during a year would be investment flow, but the machines existing on that day are a stock. Hence B is correct.

Expenditure on new machines during a year records spending that takes place over a specified period. It is gross investment flow, because investment is an addition to productive assets made during the year. The machines owned at the end of the year may form capital stock, but the expenditure itself is a flow. Therefore B is correct.

The fundamental distinction is based on the time reference used for measurement. A stock is measured at a particular point in time, such as wealth, money supply, capital, or inventory on 31 March. A flow is measured over a period, such as annual income, consumption, investment, or production. Therefore, the statement in option B correctly defines the difference between the two concepts.

Gross domestic product measures the market value of final goods and services produced within an economy during a specified period, usually a quarter or a year. Since production is accumulated over that period, GDP is a flow variable. It is not the value of assets existing on a particular date. Thus option B is correct.

National wealth is the total value of a country's accumulated assets, including physical and financial assets, measured at a particular point in time. Because it represents a balance or existing amount rather than activity during a period, it is a stock. National income and production, by contrast, are measured over a period and are flows.

The quantity of goods sold in a day counts sales transactions occurring throughout the day. Since it is measured over a time interval, it is a flow variable. The stock would be the quantity of goods remaining in the shop at a particular time, such as closing inventory. Therefore, the daily sales quantity is correctly classified by option B.

The goods remaining in a shop at the end of the day represent the inventory available at one specific point in time. Since the quantity is measured at that moment rather than accumulated over a period, it is a stock variable. Sales during the day would be a flow because they occur over a time interval. Therefore, the remaining goods are correctly identified as stock in option B.

Inventory itself is a stock measured at a particular date, but a change in inventory records the increase or decrease between two dates. That change occurs over a period and is therefore a flow. In national-income accounting, change in inventories is included in investment expenditure. Thus option B is correct.

Total inventory at the end of the year is the quantity of goods held at one specific date or closing moment. It is therefore a stock variable. Production and expenditure during the year would be flows, and the change in inventory over the year would also be a flow. The phrase “at the end” identifies the closing stock, so B is correct.

Saving during a year is measured over the entire one-year period, so it is a flow variable. It represents the part of income that is not consumed during that period and is calculated as income minus consumption. The accumulated wealth or bank balance at the end of the year would be a stock, but the saving undertaken during the year is a flow. Hence, option B is correct.

Cash held by a person on a particular date is the amount available at one point in time. It is an existing balance, so it is classified as a stock variable. Cash received or spent during a week or month would be a flow because those transactions occur over a period. The specific-date wording makes option B correct.

Cash spent in one week measures expenditure accumulated over a seven-day period. Any spending recorded during an interval is a flow variable, because it describes an activity over time. Cash remaining in hand at the end of the week would be a stock, but the amount spent during the week is a flow. Hence option B is correct.

Money supply on a particular day represents the total quantity of money available in the economy at that specified point in time. It is therefore a stock variable. Changes in money supply over a month or year may be described as flows or changes in a stock, but the level measured on one day is a stock. Option B is correct.

The value of exports during a year sums the goods and services sold to other countries over a twelve-month period. Since it is measured over an interval, it is a flow variable. Export receipts accumulated during the year are not a stock balance at a single date. Therefore, the annual export value is correctly classified as flow, option B.

The value of imports during a year records the total purchases of goods and services from abroad throughout a specified twelve-month period. It is therefore a flow variable. The amount of foreign currency or goods held on a particular date could be a stock, but annual imports are measured over time. Hence option B is correct.

Fiscal deficit for one year is the excess of government expenditure over government receipts during that financial year. It is calculated over a specified period and therefore is a flow variable. Government debt outstanding on a particular date is a stock, while the annual deficit may add to that debt. Thus option B is correct.