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Question
Distinguish between stocks and flows. Give two examples of each.
Solution
|
Basis of Difference |
Stock Variables |
Flow Variables |
|
Definition |
A stock variable is measured at a particular point of time. For example, bank balance as on October 01, 2010 is Rs 5000. |
A flow variable is measured over an interval of time. For example, interest earned on bank deposits for 1 year, i.e. from October 01, 2009 to September 30, 2010. |
|
Time Element |
They do not have an element of time attached to them |
They have an element of time attached to them such as 1 year, 6 months, 10 days, etc. |
|
Nature |
These are static in nature. |
These are dynamic in nature. |
|
Examples |
Capital, Bank deposits, Water in a tank. |
Capital formation, Interest on Capital, Water flowing in a stream. |
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