Stocks and flows

Correct answer: B. The grain stock is a stock and production is a flow

Explanation: Year-end food-grain stock means the quantity available at a particular date, such as 31 March, so it is a stock. Food-grain production during the year is the quantity produced over an interval of time, so it is a flow. The distinction depends on the measurement period: a date indicates stock, while a duration indicates flow.

Correct answer: A. Outstanding loans are a stock and new loans are a flow

Explanation: Outstanding loans show the total unpaid loan balance existing on a particular date, so they are a stock. New loans issued during a month measure lending activity over a time interval, so they are a flow. A stock is a position at a point in time, whereas a flow records an amount generated, issued, or received during a period.

Correct answer: A. Output during the year

Explanation: Output during the year is measured over the whole year, not at one particular instant. It therefore represents a flow. Capital stock at year-end, money supply today, and a bank balance on a date are measured at specified points in time and are stocks. Thus A would be wrongly labelled a stock.

Correct answer: C. Cash balance held today

Explanation: Cash balance held today is measured at a particular point in time, so it is a stock. It represents the amount of cash existing at that moment, not an amount accumulated over a specified period. Monthly income, annual sales, and yearly exports are all measured during periods and are therefore flows. Calling today’s cash balance a flow would be incorrect.

Correct answer: A. Factory building as stock and annual output as flow

Explanation: A factory building is a durable fixed asset whose value is measured at a particular date; it is therefore a stock. Annual output is the quantity produced over the course of a year, so it is a flow. The pair in A correctly combines a point-in-time asset with period-based production.

Correct answer: A. Foreign-exchange reserves as stock and annual exports as flow

Explanation: Foreign-exchange reserves are the accumulated foreign assets available at a particular date, so they are a stock. Annual exports are the value of goods and services sold abroad during a year, so they are a flow. The distinction follows from a date-based balance versus activity over a period.

Correct answer: A. Arrival is a flow and migrant population is a stock

Explanation: The number of migrants arriving during a year counts an event occurring over a time interval, so it is a flow. The migrant population present on a specified date is a total existing at one point in time, so it is a stock. The wording ‘during the year’ and ‘on a date’ distinguishes them.

Correct answer: C. On a specific date

Explanation: A stock is measured at a particular point in time, so ‘on a specific date’ is the most accurate expression. Phrases such as during the year, per month, and throughout a week describe an interval over which an activity occurs; they normally indicate a flow rather than a stock.

Correct answer: C. During a period

Explanation: A flow is measured over an interval, so ‘during a period’ is the most accurate phrase. Income earned during a month, production during a year, or exports during a quarter are flows. In contrast, on a date, at year-end, and available today refer to point-in-time stocks.

Correct answer: B. Accumulated debt is a stock and annual borrowing is a flow

Explanation: Accumulated debt is the outstanding amount built up and existing up to a particular date, so it is a stock. Annual borrowing is the amount borrowed over the course of a year, so it is a flow. The words accumulated and outstanding usually describe a position at a date, while annual or during the year describes activity over a period.

Correct answer: B. Total deposits are a stock and new deposits are a flow

Explanation: The bank’s total deposits today represent an accumulated amount measured at one specific point of time, so they are a stock. New deposits received during the month represent an addition measured over a time period, so they are a flow. The same money may contribute to the stock, but the movement during the month is classified as a flow.

Correct answer: B. Retained earnings are a stock and added profit is a flow

Explanation: Retained earnings reported at the end of the year are an accumulated balance existing at a particular date, so they are a stock. Profit added during the current year is generated over a period and is therefore a flow. The flow of profit can change the stock of retained earnings, but the two terms are not identical.

Correct answer: B. −₹30,000

Explanation: The change in stock is calculated by the formula: closing stock minus opening stock. Therefore, change in stock = ₹90,000 − ₹1,20,000 = −₹30,000. The negative sign shows that inventories fell during the accounting period. Although the amount of the decrease is ₹30,000, the change itself must be written as negative ₹30,000 because the closing stock is smaller than the opening stock.

Correct answer: A. Increase of ₹65,000

Explanation: Change in stock, also called inventory investment, is calculated as closing stock minus opening stock. Here, the change is ₹2,40,000 − ₹1,75,000 = ₹65,000. Since closing stock is greater than opening stock, inventories have increased. This positive change is included as an addition to investment expenditure in the expenditure method.

Correct answer: A. One accounting year

Explanation: GDP is a flow measure, so it records the market value of final goods and services produced within a specified period. In standard national-income accounting, this period is generally one financial or accounting year. A minute, a lifetime, or fifty years is not the normal accounting period used for reporting annual GDP.

Correct answer: B. Flow

Explanation: GDP is a flow variable because it measures the value of production generated over a period, such as a quarter or an accounting year. A stock is measured at a particular point in time, like wealth or the balance of capital. Since GDP refers to activity during an interval, it is classified as a flow.

Correct answer: A. Because it is measured over a specific period

Explanation: A flow variable is measured over a period of time, such as a month, quarter, or financial year. GDP records the value of final goods and services produced during an accounting period, so it is a flow. A stock, by contrast, is measured at a particular point in time, such as wealth on 31 March.

Correct answer: A. Flow

Explanation: GDP is a flow variable because it records the value of production of final goods and services during a specified period, usually one financial or accounting year. A stock is measured at a particular point in time, such as wealth or capital on a date. GDP therefore cannot be meaningfully stated without mentioning its time period.

Correct answer: A. Because GDP measures new production during a specified period

Explanation: GDP is a flow measure: it records the value of final goods and services produced within a country during a specified period, usually one year or one quarter. Focusing on current production prevents previously produced goods and old assets from being counted again when they are resold. A stock measures an amount at a point in time, whereas GDP measures production over time. Therefore, option A is correct.

Correct answer: A. Because it measures production during a specific period

Explanation: A flow variable is measured over an interval of time, such as a month, quarter, or year. GDP measures the monetary value of final goods and services produced within a specified period, normally one year. A stock variable, in contrast, is measured at a point in time, such as wealth or inventory on a particular date. Hence, option A is correct.

Correct answer: D. Negative

Explanation: The governing concept is change in stocks, calculated as closing inventory minus opening inventory. If inventories decline, the closing stock is smaller than the opening stock, so this subtraction produces a negative value. For example, a fall from 100 units to 70 units gives a change of 70 − 100 = −30 units. Thus option D is correct; the change is not always positive, zero or equal to depreciation.

Correct answer: C. 1045 lakh rupees

Explanation: Value of output includes both sales and the change in inventories because goods produced but not yet sold are still part of current production. Therefore, value of output = sales + change in stock = 980 + 65 = 1045 lakh rupees. Option C is correct. Option B ignores unsold output, while A subtracts and D adds an excessive amount.