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Question
Giving reasons categories the following into stock and flow:-
(i) Capital
(ii) Saving
(iii) Gross domestic product
(iv) Wealth
Solution
i. Capital: Capital is a stock variable because it is a quantity measured at a particular period of time.
ii. Saving: Saving is a flow variable because it is a quantity measured over a specified period of time (If it is given as savings, then it will be considered a stock concept which accumulates money at a particular point of time).
iii. Gross domestic product: Gross domestic product is a flow variable because it is a quantity measured over a specified period of time.
iv. Wealth: Wealth is a stock variable because it is a quantity measured at a particular period of time. It includes accumulated past savings and income not spent.
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