Question

What is the difference between Stock and Flow?

Hint:

To identify a variable, ask "when" it is measured. If the answer is a point in time ("on January 1st"), it's a stock. If the answer is a period of time ("during the year 2023"), it's a flow.

Answer 1

Step 1: Understanding the Concept:
The question asks to differentiate between two fundamental types of variables used in economics: stock variables and flow variables. The key distinction lies in their relationship with time.

Step 2: Detailed Explanation:
The difference between stock and flow variables can be explained as follows:
\[\begin{array}{|c|c|c|} \hline Basis & Stock & Flow \\ \hline \text{Meaning} & \text{A stock is a quantity of a variable measured at a particular point in time.} & \text{A flow is a quantity of a variable measured over a period of time.} \\ \hline \hline \text{Time Dimension} & \text{It is not time-dimensional. It is a static concept.} & \text{It has a time dimension (e.g., per hour, per day, per year). It is a dynamic concept.} \\ \hline \hline \text{Analogy} & \text{Like a still photograph. It captures a moment.} & \text{Like a video. It captures a process over time.} \\ \hline \hline \text{Examples} & \text{Wealth, capital, money supply, inventory, population (as on a specific date).} & \text{Income, investment, consumption, exports, profit, number of births (over a year).} \\ \hline \end{array}\]

Step 3: Final Answer:
The fundamental difference is that a stock is measured at a specific point in time (e.g., the amount of water in a tank at 9 AM), while a flow is measured over a period of time (e.g., the amount of water flowing into the tank per minute).